Amasya Enterprises Pty Ltd v Asta Developments (Aust) Pty Ltd
[2016] VSC 326
•17 June 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
ARBITRATION LIST
S CI 2016 01359
| AMASYA ENTERPRISES PTY LTD (ACN 145 743 915) & ORS | Applicants |
| v | |
| ASTA DEVELOPMENTS (AUST) PTY LTD (ACN 142 875 876) | Respondent |
S CI 2016 01254
| ASTA DEVELOPMENTS (AUST) PTY LTD (ACN 142 875 876) | Applicant |
| v | |
| AMASYA ENTERPRISES PTY LTD (ACN 145 743 915) | First Respondent |
| TEK FOODS PTY LTD (ACN 115 663 262) | Second Respondent |
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JUDGE: | CROFT J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 16 May 2016 |
DATE OF JUDGMENT: | 17 June 2016 |
CASE MAY BE CITED AS: | Amasya Enterprises Pty Ltd v Asta Developments (Aust) Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2016] VSC 326 |
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ARBITRATION – Commercial Arbitration Act 2011, s 18 – UNCITRAL Model Law on International Commercial Arbitration, art 18 – Relevant test – Divergence of Model Law and common law approaches – Trustees of Rotoaira Forest Trust v Attorney-General [1999] 2 NZLR 452 distinguished – Irrelevance of the merits – Allegation that award made on the basis of a claim that was not pleaded or argued in the arbitration – Whether objecting party given a reasonable opportunity of presenting the party’s case – Whether there was an “opportunity” – Interbulk Ltd v Aiden Shipping Co Ltd; The Vimeira [1984] 2 Lloyd’s Rep 66 – Terna Bahrain Holding Co WLL v Bin Kamil Al Shamsi [2013] 2 CLC 1 – Whether opportunity amounted to a “reasonable opportunity” – Relevance of all the circumstances of the case – AKN v ALC [2015] SGCA 18.
ARBITRATION – Application to set aside domestic award – Commercial Arbitration Act 2011 ss 23(3), 34(2)(a)(ii) and 34(2)(b)(ii) – Content of and relationship between “unable to present its case” ground and “public policy” ground – Procedural fairness – Natural justice – TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361.
ARBITRATION – Application to enforce domestic award – Commercial Arbitration Act 2011 ss 35, 36(1)(a)(ii) and 36(1)(b)(ii).
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| APPEARANCES: | Counsel | Solicitors |
For the Applicants | M.F. Wheelahan QC with | Starnet Legal |
| For the Respondent For the Applicant For the Respondents | J.A.F. Twigg QC with J.A.F. Twigg QC with M.F. Wheelahan QC with | LMS Lawyers LMS Lawyers Starnet Legal |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
Background and procedural history of the arbitration............................................................... 2
Setting aside and refusing enforcement of arbitral awards....................................................... 5
The “unable to present its case” and “public policy” grounds............................................... 16
Was s 18 of the Act complied with?............................................................................................... 21
The relevant test.......................................................................................................................... 23
Trustees of Rotoaira Forest Trust v Attorney-General................................................ 25
Merits are irrelevant.......................................................................................................... 28
The proper approach to determining compliance with s 18 (Model Law Art 18)... 33
What was the Amasya parties’ case?........................................................................................ 34
Were the Amasya parties given an “opportunity” to present their case?.......................... 34
Did the opportunity amount to a “reasonable opportunity”?............................................. 43
Should the Award be set aside as it applies to Mr Tercan?..................................................... 47
Conclusions and orders.................................................................................................................. 48
HIS HONOUR:
Introduction
There are two applications before the Court:
(a) By Originating Application to Set Aside Award filed on 13 April 2016 in proceeding number S CI 2016 01359, Amasya Enterprises Pty Ltd (“Amasya”), Tek Foods Pty Ltd (“Tek Foods”) and Mr Muhittin Tercan (collectively “the Amasya parties”) seek orders under s 34 of the Commercial Arbitration Act 2011 (“the Act” or “the Victorian Act”) setting aside an arbitral award made on 7 March 2016 (“the Award”);[1] and
(b) By Originating Application to Enforce Award filed on 7 April 2016 in proceeding number S CI 2016 01254, Asta Developments (Aust) Pty Ltd (“Asta”) seeks orders under s 35 of the Act that the Award be enforced.
[1]Amasya Enterprises Pty Ltd v Asta Developments (Aust) Pty Ltd (Interim Award of Michael Heaton QC, 7 March 2016).
The Amasya parties submit that they were unable to present their case in the arbitration because the arbitrator made the Award on the basis of a claim that was not pleaded or argued in the arbitration. It is submitted that the Award should therefore be set aside pursuant to ss 34(2)(a)(ii) and 34(2)(b)(ii) of the Act, and that enforcement of the Award should be refused pursuant to ss 36(1)(a)(ii) and 36(1)(b)(ii) of the Act.
The Amasya parties also submit that the Award should be set aside on the grounds that Mr Tercan was not a party to the arbitration agreement, relying on s 34(2)(a)(iii) of the Act. Asta does not seek enforcement as against Mr Tercan.[2]
[2]Mr Tercan is not named as a party to the enforcement application in proceeding number S CI 2016 01254.
The evidence before the Court is contained in the following affidavits:
(a) Affidavit of Kimani Boden sworn on 6 April 2016 (“Boden Affidavit”);[3]
(b) Second Affidavit of Kimani Boden sworn on 2 May 2016 (“Second Boden Affidavit”);[4] and
(c) Affidavit of Kasia Todisco affirmed on 7 April 2016.[5]
[3]Filed in support of the setting aside application in proceeding number S CI 2016 01359.
[4]Filed in support of the setting aside application in proceeding number S CI 2016 01359.
[5]Filed in support of the enforcement application in proceeding number S CI 2016 01254.
Background and procedural history of the arbitration
It is important to carefully consider the background and procedural history of the arbitration, particularly given the nature of the Amasya parties’ argument in this Court, the crux of which is that the arbitration was procedurally unfair.
In November 2013, Amasya and Asta entered into a building contract for a meat processing factory and retail outlet in Campbellfield, Victoria (“the Contract”).[6] Asta was the builder. Disputes arose during the course of the construction works and in November 2014 both Amasya and Asta purported to terminate the Contract.
[6]Boden Affidavit, Exhibit KB-1.
On 20 April and 9 June 2015, Amasya and Asta referred their respective claims to arbitration by giving each other Notices of Dispute under cl 32.1 of the Contract.[7] In addition to Amasya, Asta’s Notice of Dispute also named Tek Foods and Mr Tercan as respondents to Asta’s claim. On 9 and 19 June 2015 respectively, the parties gave each other Notices of Defence.[8] The Notices of Dispute and Notices of Defence were drafted in the form of pleadings similar to those used in litigation.
[7]Boden Affidavit, Exhibits KB-2, KB-4. The certificate identifying Exhibit KB-4 appears to be incorrectly titled “Plaintiffs’ Notice of Defence to Counterclaim”. The Plaintiffs’ Notice of Defence to Counterclaim is Exhibit KB-5.
[8]Boden Affidavit, Exhibits KB-3, KB-5.
Michael Heaton QC (“the arbitrator”) was appointed by the parties to arbitrate the dispute. The arbitration agreement in cl 32.1 of the Contract provided that:[9]
The arbitrator must hear and decide any matter by reference to considerations of general justice and fairness, and is not bound to apply the rules of evidence and procedure.
[9]Contract, cl 32.1(d).
On 9 June 2015, the arbitrator conducted a preliminary conference where it was confirmed, among other matters, that the governing law of the Contract and of the arbitration was that of Victoria, and that the principal issue in the arbitration was which party had rightfully determined the Contract.[10]
[10]Second Boden Affidavit, Exhibit KB-12, 5–6.
A seven-day evidentiary hearing was conducted between 6 and 14 August 2015 at the Melbourne Commercial Arbitration and Mediation Centre[11] and the parties were represented by senior and junior counsel. Witnesses were called and sworn. The witnesses adopted witness statements and were cross-examined. A running transcript of the proceedings was made. Evidence was tendered and marked as exhibits.
[11]See < type="1">
On 31 August 2015, the parties exchanged lengthy written submissions, which together covered over 150 pages.[12] On 23 October 2015, written reply submissions totalling over 30 pages were exchanged.[13]
[12]Boden Affidavit, Exhibits KB-6, KB-7.
[13]Boden Affidavit, Exhibits KB-8, KB-9.
On 27 October 2015, the arbitrator conducted a final oral hearing. A transcript of proceedings was again made.[14]
[14]Boden Affidavit, Exhibit KB-10.
On 7 March 2016, the arbitrator made an interim award—the Award—in favour of Asta.[15] In the Award, the arbitrator—
[15]Boden Affidavit, Exhibit KB-11.
(a) found that both Tek Foods and Mr Tercan were parties to the Contract and to the arbitration agreement in cl 32.1;[16]
[16]Award [110], [130].
(b) rejected Amasya’s claim that it was entitled to terminate the Contract;[17]
[17]Award [957].
(c) rejected Asta’s claim that it was entitled to terminate the Contract;[18]
(d) found instead that the Contract had been mutually abandoned;[19] and
(e) found that by reason of the mutual abandonment, Asta was entitled to its claim on a quantum meruit basis for the work which it had actually performed.[20]
[18]Award [956].
[19]Award [963].
[20]Award [964].
Accordingly, the arbitrator made the following interim award:[21]
[21]Award [1067].
1. The notice of dispute of Amasya Enterprises Pty Ltd is dismissed.
2.On the notice of dispute of Asta Developments (Aust) Pty Ltd, Amasya Enterprises Pty Ltd and Tek Foods Pty Ltd are jointly and severally liable to pay to Asta Developments (Aust) Pty Ltd $977,804.78 and interest of $69,477.72 on that amount to the date of this interim award and thereafter to the date of payment at the daily rate of $254.50.
3.In the event that payment as referred to in paragraph 2 is not made within 30 days of the date of this interim award, Mr Muhittin Tercan is liable to pay Asta Developments (Aust) Pty Ltd any amount unpaid within 30 days of demand.
4. The issues of:
a)Payment of the fees of the arbitrator; and
b) Payment of the costs of the arbitration (other than the fees of the arbitrator);
are to be the subject of submissions of the parties.
5. I direct that Amasya Enterprises Pty Ltd, Tek Foods Pty Ltd and Mr Tercan and Asta Developments (Aust) Pty Ltd provide any submissions as to whether any costs should be awarded and if so in any and what [proportions] and to whom and by whom they should be paid, which they wish to make to the arbitrator and to each other by 16 March 2016.
6.I reserve liberty to apply on 1 days’ notice.
7.The place of this arbitration is Melbourne.
8.The date of this interim award is 7 March 2016.
On 19 May 2016, following the hearing of these proceedings but before judgment was handed down, the arbitrator made a further interim award on liability for costs in the arbitration (“the Costs Award”). On 26 May 2016, the Amasya parties applied for leave to amend the Originating Application to Set Aside Award filed on 13 April 2016 in order to seek to set aside the Costs Award.
Setting aside and refusing enforcement of arbitral awards
The Amasya parties rely on specific provisions of ss 34 and 36 of the Act in their application to have the Award set aside and in defence of Asta’s application to have it enforced. However, these provisions must be read in their legislative context.[22] The relevant legislative context was considered in Cameron Australasia Pty Ltd v AED Oil Ltd (“Cameron”), a case which also involved concurrent applications to enforce and set aside arbitral awards under ss 34 and 36 of the Act.[23] It is convenient to recall this discussion as follows:[24]
[22]See Subway Systems Australia Pty Ltd v Ireland (2014) 46 VR 49 at 57 [24]–[27]; Cameron Australasia Pty Ltd v AED Oil Ltd [2015] VSC 163, [9].
[23][2015] VSC 163.
[24]Cameron Australasia Pty Ltd v AED Oil Ltd [2015] VSC 163, [10]–[12].
[10]In terms of overall context and provenance, it is critical to have regard to ss 1AC and 2A of the Act. These provisions are as follows:[25]
[25]Commercial Arbitration Act 2011, ss 1AC, 2A (emphasis in original).
1AC Paramount object of Act
(1)The paramount object of this Act is to facilitate the fair and final resolution of commercial disputes by impartial arbitral tribunals without unnecessary delay or expense.
(2)This Act aims to achieve its paramount object by—
(a)enabling parties to agree about how their commercial disputes are to be resolved (subject to subsection (3) and such safeguards as are necessary in the public interest); and
(b)providing arbitration procedures that enable commercial disputes to be resolved in a cost effective manner, informally and quickly.
(3)This Act must be interpreted, and the functions of an arbitral tribunal must be exercised, so that (as far as practicable) the paramount object of this Act is achieved.
(4)Subsection (3) does not affect the application of section 35 of the Interpretation of Legislation Act 1984 for the purposes of interpreting this Act.
…
2A International origin and general principles (cf Model Law Art 2A)
(1)Subject to section 1AC, in the interpretation of this Act, regard is to be had to the need to promote so far as practicable uniformity between the application of this Act to domestic commercial arbitrations and the application of the provisions of the Model Law (as given effect by the International Arbitration Act 1974 of the Commonwealth) to international commercial arbitrations and the observance of good faith.
(2) [omitted]
(3)Without limiting subsection (1), in interpreting this Act, reference may be made to the documents relating to the Model Law of—
(a)the United Nations Commission on International Trade Law; and
(b)its working groups for the preparation of the Model Law.
(4)Subsection (3) does not affect the application of section 35 of the Interpretation of Legislation Act 1984 for the purposes of interpreting this Act.
Note
This section differs from the Model Law. Art 2A(1) has been changed as a consequence of the application of the Act to domestic (instead of international) commercial arbitrations. Art 2A(2) is omitted because it is covered by the provision referred to in section 1AC(4). Subsections (3) and (4) reflect section 17 of the International Commercial Arbitration Act 1974 of the Commonwealth.
[11]Apart from providing a paramount object — a “guiding star” — for the interpretation of the provisions of the Act, s 1AC also reflects the philosophy and approach of the international instrument which the provisions of the Act reflect and substantially reproduce in the same terms. The international instrument in question is the product of the work of the United Nations Commission on International Trade Law (“UNCITRAL”). In June 1985, UNCITRAL adopted the Model Law on International Commercial Arbitration (“the Model Law”). The United Nations General Assembly recommended that—[26]
[26]Model Law on International Commercial Arbitration of the United Nations Commission on International Trade Law, GA Res 40/72, UN GAOR, 40th sess, 112th mtg, Supp No 17, UN Doc A/RES/40/72 (11 December 1985) annex I [2].
all States give due consideration to the Model Law … in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice.
The Model Law was amended for the first time by UNCITRAL in December 2006. Again, the General Assembly resolved that all States “give favourable consideration” to enacting the revised articles of the Model Law.[27]
[12]The Victorian Parliament made clear its intention to enact the Model Law in the “Note” which appears in the preliminary part of the Act, in the following terms:[28]
Sections of this Act that contain a reference to the “Model Law” in the heading are substantially the same as the provisions of the UNCITRAL Model Law on International Commercial Arbitration … so as to be as uniform as possible with the UNCITRAL Model Law. Some changes have been made to those provisions of the Act based on the UNCITRAL Model Law to amend or supplement the provisions in their application to domestic arbitrations in Victoria or to accommodate modern drafting styles and conventions (for example, provisions are drafted in gender neutral terms and archaisms are replaced with modern alternatives). Notes draw attention to substantive changes.
[27]Revised Articles of the Model Law on International Commercial Arbitration of the United Nations Commission on International Trade Law, and the Recommendation Regarding the Interpretation of Article II, Paragraph 2, and Article VII, Paragraph 1, of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Done at New York, 10 June 1958, GA Res 61/33, UN GAOR, 61st sess, 64th mtg, Agenda Item 77, Supp No 17, UN Doc A/RES/61/33 (18 December 2006) annex I.
[28]Commercial Arbitration Act 2011, pt 1A (emphasis added).
The international provenance of the Act was confirmed by the Court of Appeal in Subway Systems Australia Pty Ltd v Ireland, where Maxwell P, after setting out s 2A, said:[29]
24The Victorian Parliament here expressed its intention that the interpretation of the Victorian Act should ensure “so far as practicable” that there was uniformity between:
(a)the application of the Victorian Act to domestic commercial arbitrations; and
(b)the application of the provisions of the Model Law (as enacted at the Commonwealth level) to international commercial arbitrations.
[29](2014) 46 VR 49 at 57 [24]–[27] (emphasis in original).
25The Commonwealth Act is the International Arbitration Act 1974 (Cth). It has the following objects:[30]
[30]International Arbitration Act 1974 (Cth) s 2D.
2D Objects of this Act
The objects of this Act are:
(a)to facilitate international trade and commerce by encouraging the use of arbitration as a method of resolving disputes; and
(b)to facilitate the use of arbitration agreements made in relation to international trade and commerce; and
(c)to facilitate the recognition and enforcement of arbitral awards made in relation to international trade and commerce; and
(d)to give effect to Australia’s obligations under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted in 1958 by the United Nations Conference on International Commercial Arbitration at its twenty-fourth meeting; and
(e)to give effect to the UNCITRAL Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law on 21 June 1985 and amended by the United Nations Commission on International Trade Law on 7 July 2006; and
(f)to give effect to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States signed by Australia on 24 March 1975.
26As will appear, uniformity of interpretation across jurisdictions has been viewed as of paramount importance where a treaty (or a law implementing a treaty) is concerned with international commerce. It is therefore significant that the Victorian Parliament has expressed its own intention that the application of the Model Law to domestic arbitrations should be in line with its application to international arbitrations.
27The fact that the question in issue here is governed by the Victorian embodiment of the Model Law, rather than by the Model Law as implemented by another State or by the Commonwealth, emphasises the importance of uniformity. The fact that an international supplier of goods and services will very likely be subject, in a federation like Australia, to the laws of different States would seem to be a powerful argument for ensuring uniformity “so far as practicable”.
The only provisions in the Model Law which provide for recourse against an arbitral award are contained in art 34, which is reflected in s 34 of the Act as follows:
34Application for setting aside as exclusive recourse against arbitral award (cf Model Law Art 34)
(1)Recourse to the Court against an arbitral award may be made only by an application for setting aside in accordance with subsections (2) and (3) or by an appeal under section 34A.
Note
The Model Law does not provide for appeals under section 34A.
(2)An arbitral award may be set aside by the Court only if—
(a)the party making the application furnishes proof that—
(i)a party to the arbitration agreement referred to in section 7 was under some incapacity; or the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication in it, under the law of this State; or
(ii)the party making the application was not given proper notice of the appointment of an arbitral tribunal or of the arbitral proceedings or was otherwise unable to present the party’s case; or
(iii)the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or
(iv)the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Act from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Act; or
(b)the Court finds that—
(i)the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or
(ii)the award is in conflict with the public policy of this State.
(3)An application for setting aside may not be made after 3 months have elapsed from the date on which the party making that application had received the award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal.
(4)The Court, when asked to set aside an award, may, where appropriate and so requested by a party, suspend the setting aside of proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral tribunal’s opinion will eliminate the grounds for setting aside.
Article 36 of the Model Law sets out the grounds upon which recognition or enforcement of an arbitral award may be refused by a court—grounds which substantially mirror those upon which an award may be set aside. Article 36 of the Model Law is reflected in s 36 of the Act as follows:
36Grounds for refusing recognition or enforcement (cf Model Law Art 36)
(1)Recognition or enforcement of an arbitral award, irrespective of the State or Territory in which it was made, may be refused only—
(a)at the request of the party against whom it is invoked, if that party furnishes to the Court proof that—
(i)a party to the arbitration agreement was under some incapacity, or the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication in it, under the law of the State or Territory where the award was made; or
(ii)the party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present the party's case; or
(iii)the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognised and enforced; or
(iv)the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the State or Territory where the arbitration took place; or
(v)the award has not yet become binding on the parties or has been set aside or suspended by a court of the State or Territory in which, or under the law of which, that award was made; or
(b) if the Court finds that—
(i)the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or
(ii)the recognition or enforcement of the award would be contrary to the public policy of this State.
(2)If an application for setting aside or suspension of an award has been made to a court referred to in subsection (1)(a)(v), the Court may, if it considers it proper, adjourn its decision and may also, on the application of the party claiming recognition or enforcement of the award, order the party to provide appropriate security.
In TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (“TCL”), the Full Federal Court said that an arbitral award will not be set aside or refused recognition or enforcement under arts 34 and 36 of the Model Law—[31]
unless there is demonstrated real unfairness or real practical injustice in how the international litigation or dispute resolution was conducted or resolved, by reference to established principles of natural justice or procedural fairness. The demonstration of real unfairness or real practical injustice will generally be able to be expressed, and demonstrated, with tolerable clarity and expedition.
[31](2014) 232 FCR 361 at 376–7 [55] (emphasis added). See also at 394 [111], 395 [113].
This position is modified to some extent by ss 34 and 34A of the Act. The provisions of s 34A were explained in Cameron as follows:[32]
[16] …
The reference [in s 34 of the Act] to s 34A is a reference to a provision which appears only in the Act with respect to arbitrations within the ambit of its provisions, namely, domestic arbitrations. It is not a provision which is reflected in the International Arbitration Act 1974 (Cth), which, broadly speaking, enacts the provisions of the Model Law for the purpose of international commercial arbitrations. The provisions of s 34A of the Act allow for an appeal on a question of law arising out of an arbitral award, but only in limited circumstances, and only on an “opt-in” basis. Appeals against domestic arbitral awards on questions of law have a long history, both in England and in Australia.[33] Having regard to this history, it is unsurprising that it was thought appropriate to include limited provision for appeals on questions of law arising out of domestic arbitral awards in these terms; but to maintain the quite limited recourse against awards and provisions for refusal of recognition or enforcement of arbitral awards in terms of arts 34 to 36 of the Model Law with respect to international commercial arbitration.
[17]Having regard to these matters and the inclusion of specific provisions for appeals on a question of law in s 34A, it is clear from the structure of the Act that the provisions of s 34 contemplate quite limited court intervention and nothing in the nature of an appeal on a question of law. Moreover, international jurisprudence with respect to Model Law art 34, from which s 34 of the Act is derived, make this abundantly clear. …
[32]Cameron Australasia Pty Ltd v AED Oil Ltd [2015] VSC 163, [16]–[17] (citations omitted).
[33]Doug Jones, Commercial Arbitration in Australia (Thomson Reuters, 2nd ed, 2013) 491–517.
Further to the provisions of s 34A of the Act, commercial parties may also choose to agree to appeal procedures within the scope of the referral to arbitration itself. For example, the Arbitrators’ and Mediators’ Institute of New Zealand (“AMINZ”) Arbitration Appeal Rules provide for detailed procedures which enable commercial parties to agree to allow appeals on questions of law to an arbitral appeal tribunal.[34] A similar kind of appeal regime could also be achieved on an ad hoc basis, as agreed by the parties. In the context of the present dispute, the parties chose not to provide for an appeal of the kind contemplated by s 34A of the Act, nor did they agree to an appeal procedure of the kind provided for in the AMINZ Arbitration Appeal Rules in their arbitration agreement. Moreover, at the time of hearing these applications, the parties had not exercised their rights under s 34A of the Act to appeal to the Court on a question of law.
[34]Arbitrators’ and Mediators’ Institute of New Zealand, AMINZ Arbitration Appeal Rules (AMINZ Council, 27 May 2009) < type="1">
Further, the task of considering the relevant legislative context of ss 34 and 36 of the Act also includes having regard to the nature of the Court’s power to intervene in the arbitral sphere and the judicial approach to be taken to the kinds of applications presently before the Court.[35] These matters were considered in Indian Farmers Fertiliser Cooperative Ltd v Gutnick (“Gutnick”) in the context of an enforcement application under the International Arbitration 1974 (Cth) (“the International Act”).[36] In light of the international provenance of the Victorian Act, the following extracts are also relevant in the present context.[37] In the Gutnick case, I said:[38]
[35]See Indian Farmers Fertiliser Cooperative Ltd v Gutnick (2015) 304 FLR 199 at 204–9 [12]–[24]. See Gutnick v Indian Farmers Fertiliser Cooperative Ltd [2016] VSCA 5 where leave to appeal was refused. See also Justice Clyde Croft, “The ‘Temptation of Domesticity’ and the Role of the Courts in Australia’s Arbitration Regime” (2015) 89 Australian Law Journal 684; Chief Justice James Allsop and Justice Clyde Croft, “The Role of the Courts in Australia’s Arbitration Regime” (Paper presented at the Commercial CPD Seminar Series, Melbourne, 11 November 2015) < 304 FLR 199.
[37]Subway Systems Australia Pty Ltd v Ireland (2014) 46 VR 49 at 57 [24]–[27]; Cameron Australasia Pty Ltd v AED Oil Ltd [2015] VSC 163, [9]–[17].
[38]Indian Farmers Fertiliser Cooperative Ltd v Gutnick (2015) 304 FLR 199 at 206–9 [17]–[18], [20]–[24] (citations omitted). An application for leave to appeal was refused in Gutnick v Indian Farmers Fertiliser Cooperative Ltd 2016] VSCA 5.
[17]I turn now to the nature of the Court’s enforcement power, and the judicial approach mandated by the [International] Act.[39] In TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia, French CJ and Gageler J—in the context of finding that s 8 of the [International] Act did not contravene Chapter III of the Constitution—said:[40]
[39]See generally Justice Clyde Croft, “The ‘Temptation of Domesticity’ and the Role of the Courts in Australia’s Arbitration Regime” (2015) 89 Australian Law Journal 684.
[40](2013) 251 CLR 533 at 555 [34].
Enforcement of an arbitral award is enforcement of the binding result of the agreement of the parties to submit their dispute to arbitration, not enforcement of any disputed right submitted to arbitration.
In a similar vein, Hayne, Crennan, Kiefel and Bell JJ said:[41]
[41]TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia (2013) 251 CLR 533 at 575 [108].
To conclude that a particular arbitral award is final and conclusive does no more than reflect the consequences of the parties having agreed to submit a dispute of the relevant kind to arbitration.
[18]This means that the role of the courts under the [International] Act is understood to be limited to the enforcement of contractual obligations—that is, holding the parties to their bargain to finally determine disputes using arbitration. The courts’ role does not involve determining substantive disputes between the parties as to fact or law, or otherwise reviewing the decision of an arbitral tribunal. This position was recently reinforced in Sauber Motorsport AG v Giedo van der Garde BV,[42] where the Court of Appeal, adopting the analysis of the Full Federal Court in TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd,[43] said:[44]
[42](2015) 317 ALR 786.
[43](2014) 232 FCR 361 at 383–4 [75].
[44]Sauber Motorsport AG v Giedo van der Garde BV (2015) 317 ALR 786 at 789 [8] (citations omitted). See also 790 [17]. See also Giedo van der Garde BV v Sauber Motorsport AG (2015) 317 ALR 792.
Courts should not entertain a disguised attack on the factual findings or legal conclusions of an arbitrator “dressed up as a complaint about natural justice”. Errors of fact or law are not legitimate bases for curial intervention. Unfairness in any particular case will depend upon context, and all the circumstances of that case.
…
[20]In further consideration of the appropriate judicial approach in such cases, the Full Federal Court said in TCL that:[45]
[45]TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361 at 383–4 [75].
[I]t is not only appropriate, but essential, to pay due regard to the reasoned decisions of other countries where their laws are either based on, or take their content from, international conventions or instruments such as the New York Convention and the Model Law. It is of the first importance to attempt to create or maintain, as far as the language employed by Parliament in the [Act] permits, a degree of international harmony and concordance of approach to international commercial arbitration. This is especially so by reference to the reasoned judgments of common law countries in the region, such as Singapore, Hong Kong and New Zealand.
[21]In light of this statement, it is significant that two of the leading arbitration jurisdictions in the Asia-Pacific region, Singapore and Hong Kong, also adopt a policy of minimal curial intervention in arbitration matters. In Grand Pacific Holdings Ltd v Pacific China Holdings Ltd (in liq) (No 1), the Hong Kong Court of Appeal, with respect to an application to set aside an award under art 34 of the Model Law—which, the court noted, is not materially distinguishable from refusal to enforce under art 36—said:[46]
[46][2012] 4 HKLRD 1 at 7 [7] (citations omitted).
The Court’s approach to such application is not controversial. The Court is concerned with “the structural integrity of the arbitration proceedings”. The remedy of setting aside is not an appeal, and the Court will not address itself to the substantive merits of the dispute, or to the correctness or otherwise of the award, whether concerning errors of fact or law.
[22]In a similar vein, the Chief Justice of Singapore, Menon CJ, delivering the judgment of the Singapore Court of Appeal in AKN v ALC, said:[47]
[47][2015] SGCA 18, [37]–[39] (citations omitted).
37A critical foundational principle in arbitration is that the parties choose their adjudicators. Central to this is the notion of party autonomy. Just as the parties enjoy many of the benefits of party autonomy, so too must they accept the consequences of the choices they have made. The courts do not and must not interfere in the merits of an arbitral award and, in the process, bail out parties who have made choices that they might come to regret, or offer them a second chance to canvass the merits of their respective cases. This important proscription is reflected in the policy of minimal curial intervention in arbitral proceedings, a mainstay of the Model Law and the [International Arbitration Act (Singapore, cap 143A, 2002 rev ed)].
38In particular, there is no right of appeal from arbitral awards. That is not to say that the courts can never intervene. However, the grounds for curial intervention are narrowly circumscribed, and generally concern process failures that are unfair and prejudice the parties or instances where the arbitral tribunal has made a decision that is beyond the scope of the arbitration agreement. It follows that, from the courts’ perspective, the parties to an arbitration do not have a right to a “correct” decision from the arbitral tribunal that can be vindicated by the courts. Instead, they only have a right to a decision that is within the ambit of their consent to have their dispute arbitrated, and that is arrived at following a fair process.
39In the light of their limited role in arbitral proceedings, the courts must resist the temptation to engage with what is substantially an appeal on the legal merits of an arbitral award, but which, through the ingenuity of counsel, may be disguised and presented as a challenge to process failures during the arbitration. …
[23]In Robotunits Pty Ltd v Mennel, after referring to this statement of principle by Menon CJ, I said:[48]
This is an important illustration of the need for courts to resist the temptation of “domesticity” in approaching matters involving Model Law and/or New York Convention based legislation. In other words, courts must resist the temptation to approach such matters through the prism of principles and doctrines not found in the Model Law or the New York Convention, and which may be peculiar to a particular domestic jurisdiction.
[24]Like all temptation, adopting a domestic approach may be attractive in the short-term, but ultimately has the potential to interfere with broader, longer-term objectives. Chief among these long-term objectives in the present context is the promotion of international uniformity in international commercial arbitration practice referred to in TCL. …
[48](2015) 297 FLR 300 at 306 [14] (citations omitted).
In light of these powerful statements of principle from the High Court, the Court of Appeal and the Full Federal Court, as well as the Courts of Appeal in Singapore and Hong Kong, as to the nature of the Court’s jurisdiction and the policy of minimal curial intervention under the Model Law—and, given its international provenance, under the Act—I now turn to consider the specific grounds for setting aside the Award and resisting its enforcement relied upon by the Amasya parties.
The “unable to present its case” and “public policy” grounds
The Amasya parties rely on ss 34(2)(a)(ii) and 36(1)(a)(ii) of the Act (the “unable to present its case” ground) and ss 34(2)(b)(ii) and 36(1)(b)(ii) of the Act (the “public policy” ground). Section 34(2) relevantly provides that the Court may set an arbitral award aside if:
(a) the party making the application furnishes proof that—
…
(ii)the party making the application was not given proper notice of the appointment of an arbitral tribunal or of the arbitral proceedings or was otherwise unable to present the party's case; or
…
(b) the Court finds that—
…
(ii) the award is in conflict with the public policy of this State.
As set out above, ss 36(1)(a)(ii) and (b)(ii) of the Act provide that recognition or enforcement may be refused on relevantly the same grounds as those on which an award may be set aside under ss 34(2)(a)(ii) and (b)(ii).[49]
[49]It may be noted that the wording of the “public policy” ground in s 36(1)(b)(ii) of the Act differs to that in s 34(2)(b)(ii) in that it refers to the recognition or enforcement of the award being contrary to public policy, as opposed to the award itself conflicting public policy. Nevertheless, in my view, there is no material difference in what is required to satisfy the “public policy” ground in ss 34(2)(b)(ii) and 36(1)(b)(ii) of the Act.
The “unable to present its case” and “public policy” grounds were argued together and as alternatives to one another in these proceedings. In my view, and for the reasons that follow, there is no practical difference between these two grounds in the way in which they relate to natural justice and procedural fairness in the circumstances of this case. Nevertheless, it is important to note that these grounds are conceptually different. The “public policy” ground is directed towards contraventions of “fundamental principles of justice and morality” of Victoria.[50] By contrast, the “unable to present its case” ground focuses on whether the party seeking to set aside the award has been accorded procedural fairness. As the following reasons show, this point may be a distinction without a difference in the present context because the requirement that parties in arbitrations be accorded procedural fairness or natural justice within the meaning of those terms in the relevant legislative context is part of the public policy of Victoria, and for that matter, Australia.[51] In accordance with the approach adopted by the parties then, I will consider the “unable to present its case” ground and the “public policy” ground together.
[50]TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361 at 384 [76].
[51]See Corporacion Transnacional de Inversiones SA de CV v STET International SpA (1999) 45 OR (3d) 183, [73].
The nub of the Amasya parties’ complaint is that they were denied procedural fairness or natural justice in breach of s 18 of the Act because the arbitrator made the Award on the basis of a claim that was not put in Asta’s Notice of Dispute and was not argued in the arbitration. Section 18 of the Act reflects the “golden rule” of arbitration—it must be fair. Section 18 provides:
18 Equal treatment of parties (cf Model Law Art 18)
The parties must be treated with equality and each party must be given a reasonable opportunity of presenting the party's case.
This section is followed by a note which reads:
Note
This section differs from the Model Law to the extent that it requires a party to be given a "reasonable", instead of "full", opportunity of presenting the party's case.
In my view, the words “reasonable” and “full” as they are used in s 18 of the Act and art 18 of the Model Law respectively impose the same standard.[52] What is required is that the arbitral process be fair and that each party be given a reasonable opportunity to present its case. This position is consistent with what was said by the Hong Kong Court of Appeal in Grand Pacific Holdings Ltd v Pacific China Holdings Ltd (in liq) (No 1)—namely that the term “full opportunity” in art 18 of the Model Law “cannot mean that a party is entitled to present any case it pleases, any time it pleases, no matter how long the presentation should take.”[53] This position is made express in s 18C of the International Act which provides that, for the purposes of art 18 of the Model Law, a party is “taken to have been given a full opportunity to present the party’s case if the party is given a reasonable opportunity to present the party’s case.”
[52]See Cameron Australasia Pty Ltd v AED Oil Ltd [2015] VSC 163, [42].
[53][2012] 4 HKLRD 1 at 35 [95]. See also Triulzi Cesare SRL v Xinyi Group (Glass) Co Ltd [2015] 1 SLR 114 at 150 [123]–[125]; Howard M Holtzmann and Joseph E Neuhaus, A Guide to the UNCITRAL Model Law on International Commercial Arbitration: Legislative History and Commentary (Kluwer Law and Taxation, 1989) 551.
The purpose of the requirement in art 18 of the Model Law is as stated by the Ontario Superior Court of Justice in Corporacion Transnacional de Inversiones SA de CV v STET International SpA:[54]
The purpose of art 18 is to protect a party from egregious and injudicious conduct by … [an arbitral tribunal]. It is not intended to protect a party from its own failures or strategic choices.
[54](1999) 45 OR (3d) 183, [73] cited in United Nations Commission on International Trade Law, UNCITRAL 2012 Digest of Case Law on the Model Law on International Commercial Arbitration (UNCITRAL, 2012) 98 [7]. See Triulzi Cesare SRL v Xinyi Group (Glass) Co Ltd [2015] 1 SLR 114 at 129–30 [51]; Cameron Australasia Pty Ltd v AED Oil Ltd [2015] VSC 163, [23].
If arbitral proceedings are conducted in a way that contravenes s 18 of the Act, the product of the arbitral process—the arbitral award—may be set aside or refused recognition or enforcement on the grounds that a party was unable to present its case. In Dongwoo Mann+Hummel Co Ltd v Mann+Hummel GmbH, Chan Seng Onn J, sitting in the High Court of Singapore, considered the “unable to present its case” ground under art 34(2)(a)(ii) of the Model Law and said:[55]
Whether a party was or was not able to present its case at the arbitration is very much a question of fact and degree, and it necessarily focuses on the overall conduct of the proceedings with particular attention paid to the conduct of the tribunal and the parties themselves.
[55][2008] 3 SLR(R) 871 at 892 [55]. See Cameron Australasia Pty Ltd v AED Oil Ltd [2015] VSC 163, [23].
A breach of s 18 of the Act in the making of an arbitral award may also result in the award being set aside or recognition or enforcement being refused on public policy grounds. In TCL, the Full Federal Court conducted a comprehensive review of the “public policy” ground under arts 34(2)(b)(ii) and 36(1)(b)(ii) of the Model Law.[56] Allsop CJ, Middleton and Foster JJ considered the restrictive interpretation to be given to this ground and made extensive reference to the legislative history of the Model Law and to international jurisprudence, including leading authorities from the Asia-Pacific region.[57] For present purposes it is sufficient to recall the crux of this discussion, namely that “public policy” is “limited to the fundamental principles of justice and morality of the state, recognising the international dimension of the context”.[58]
[56]TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361.
[57]See TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361 at 383–6 [74]–[80]. See, eg, Indian Farmers Fertiliser Cooperative Ltd v Gutnick (2015) 304 FLR 199 at 229–32 [99]–[107] where it was held that the enforcement of an award which allows for double recovery would likely be contrary to public policy.
[58]TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361 at 384 [76].
In the course of its reasons, the Full Court considered the extension of the concept of “public policy” to complaints about procedural fairness or natural justice such as those which arise in the present proceedings. Their Honours referred to the UNCITRAL report which led to the adoption of the Model Law by the United Nations General Assembly in June 1985, which states:[59]
It was understood that the term “public policy”, which was used in the 1958 New York Convention and many other treaties, covered fundamental principles of law and justice in substantive as well as procedural respects. Thus, instances such as corruption, bribery or fraud and similar serious cases would constitute a ground for setting aside. It was noted, in that connection, that the wording “the award is in conflict with the public policy of this State” was not to be interpreted as excluding instances or events relating to the manner in which an award was arrived at.
[59]Report of the United Nations Commission on International Trade Law on the Work of its Eighteenth Session, UN GAOR, 40th sess, Supp No 17, UN Doc A/40/17 (3–21 June 1985) 58 [297]. See TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361 at 381 [65].
The Full Court went on to consider the relationship between art 18 of the Model Law and the “public policy” ground as that relationship was originally understood by UNCITRAL:[60]
[I]t was clearly understood that breaches of art 18 could constitute a state of affairs contrary to … [public policy]. There was, however, reluctance to make explicit the fact that a breach of art 18 was a ground to set aside the award, not because of any expressed view that a breach of that central article should not lead to invalidity of the award (to the contrary it was thought that it could), but the perceived greater importance of aligning arts 34 and 36, than of aligning art 34 and a proposed art 18.
[60]TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361 at 382 [68] (citations omitted).
That breaches of the rules of procedural fairness or natural justice—as those rules are understood in the context of art 18 of the Model Law—offend public policy has been made express by the Commonwealth Parliament in the International Act. Section 19 of the International Act was inserted in 1989 and provides:[61]
[61]International Arbitration Act 1974 (Cth) s 19. Article 17I of the Model Law sets out the grounds for refusing recognition or enforcement of interim measures made by arbitral tribunals. Like arbitral awards, interim measures may be refused recognition or enforcement on the grounds that to do so would be contrary to public policy: Model Law, arts 17I(1)(b)(ii), 36(1)(b)(ii). See Commercial Arbitration Act 2011, s 17I.
19 Articles 17I, 34 and 36 of Model Law—public policy
Without limiting the generality of Articles 17I(1)(b)(ii), 34(2)(b)(ii) and 36(1)(b)(ii) of the Model Law, it is declared, for the avoidance of any doubt, that, for the purposes of those Articles, an interim measure or award is in conflict with, or is contrary to, the public policy of Australia if:
(a)the making of the interim measure or award was induced or affected by fraud or corruption; or
(b)a breach of the rules of natural justice occurred in connection with the making of the interim measure or award.
Further, s 8(7A) of the International Act was inserted in 2010 and makes the same clarification in relation to s 8(7)(b) of that Act which provides for the “public policy” ground for refusing enforcement in Australia of a foreign award:[62]
(7A)To avoid doubt and without limiting paragraph (7)(b), the enforcement of a foreign award would be contrary to public policy if:
(a)the making of the award was induced or affected by fraud or corruption; or
(b)a breach of the rules of natural justice occurred in connection with the making of the award.
[62]International Arbitration Act 1974 (Cth) s 8(7A)(b).
As is evident from the terms of these clarifying provisions, the International Act was amended “to avoid doubt”. This position is also evident from the relevant explanatory memoranda.[63] These clarifying provisions were not intended to—and, in my view, do not—change the content of the “public policy” ground under the Model Law as enacted in Australia by the International Act.[64] Accordingly, the absence of corresponding provisions intended to avoid any such perceived doubt in the application of ss 34(2)(b)(ii) or 36(1)(b)(ii) of the Victorian Act does not mean that the concept of public policy is to be understood differently under the International Act and the Victorian Act. This position accords with what was said in TCL, namely that, in reality, there is no doubt that the requirement of “fairness and equality of treatment of the parties” to arbitration is part of the concept of “public policy”.[65] It follows from the preceding discussion that a breach of s 18 of the Act may result in an award being set aside or refused recognition or enforcement on either the “unable to present its case” ground or the “public policy” ground.
[63]Explanatory Memorandum, International Arbitration Amendment Bill 1988 (Cth) 10 [9]; Explanatory Memorandum, International Arbitration Amendment Bill 2009 (Cth) 8 [49]–[52]. Singapore and New Zealand have made similar amendments to their international arbitration legislation: see s 24 of the International Arbitration Act (Singapore, cap 143A, 2002 rev ed) and art 34(6) of Sch 1 to the Arbitration Act 1996 (NZ).
[64]International Arbitration Act 1974 (Cth) ss 8(7)(b), 16; Model Law, art 34(2)(b)(ii), 36(1)(b)(ii).
[65]TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361 at 383 [73].
Was s 18 of the Act complied with?
The Amasya parties argue that s 18 of the Act was not complied with and that they were not given a reasonable opportunity to present their case in the arbitration because the arbitrator made the Award on the basis of a claim that was neither pleaded nor argued by Asta. In my view, and for the reasons that follow, the Amasya parties were given a reasonable opportunity to present their case and there has been no breach of s 18 of the Act. Accordingly, the Award should not be set aside under ss 34(2)(a)(ii) or (b)(ii), or refused enforcement under ss 36(1)(a)(ii) or (b)(ii) of the Act.
The Amasya parties submit that they were denied procedural fairness or natural justice in relation to the arbitrator’s finding that the Contract had been mutually abandoned and that, as a result, Asta was entitled to its claim on a quantum meruit basis.[66] This finding, it is said, is both contrary to law and to “considerations of general justice and fairness”, being the terms of the arbitrator’s mandate under the arbitration agreement.[67] However, despite making this submission, the Amasya parties do not seek to set the Award aside or resist its enforcement on the grounds that it contains an error of law, or on the grounds that the arbitrator decided the matter contrary to “considerations of general justice and fairness”.[68] Asta appeared to ultimately accept that recourse against the Award was not being sought on these grounds.[69]
[66]Applicants’ Outline of Submissions (2 May 2016) [4].
[67]Applicants’ Outline of Submissions (2 May 2016) [15]–[16], [22]–[27]; Transcript 17–31.
[68]See Transcript 9–10, 34, 40–1. Cf Cameron Australasia Pty Ltd v AED Oil Ltd [2015] VSC 163, [45] where the objecting party argued that it was unable to present its case “by reason of serious legal errors” committed by the arbitral tribunal.
[69]Transcript 48–9. Cf Respondent’s Outline of Submissions (10 May 2016) [44].
Rather, the Amasya parties submit that the arbitrator made the Award on the basis of a cause of action which was not pleaded, developed or argued by Asta.[70] It is said that the arbitrator’s finding that Asta, as the builder, is entitled to payment on a quantum meruit basis as a consequence of a finding that the Contract had been mutually abandoned (“the issue”) was a “dramatic development in the case, the import of which was not communicated by the arbitrator to the [Amasya parties] in any way to permit the [Amasya parties] to deal with it.”[71] As a result, the Amasya parties argue that:[72]
Where an important issue such as this is not pleaded and not argued, then it is “not fair to decide a case against a party on an issue that has never been raised in the case without drawing the point to his attention so that he may have an opportunity of dealing with it, either by calling further evidence or by addressing argument on the facts or the law to the tribunal.”[73] An arbitrator must confine himself to the materials put before him unless the contrary is agreed, and must not unexpectedly decide a case on a point which he has invented himself to create surprise and deprive a party of the opportunity to address full argument on the case they have to answer.[74]
[70]Applicants’ Outline of Submissions (2 May 2016) [18], [30].
[71]Applicants’ Outline of Submissions (2 May 2016) [31] citing Société Franco-Tunisienne D'Armement-Tunis v Ceylon; The Massalia [1959] 1 WLR 787 at 799.
[72]Applicants’ Outline of Submissions (2 May 2016) [36].
[73]Interbulk Ltd v Aiden Shipping Co Ltd; The Vimeira [1984] 2 Lloyd’s Rep 66 at 75.
[74]Trustees of Rotoaira Forest Trust v Attorney-General [1999] 2 NZLR 452 at 460.
In response, Asta submits that the arbitrator did not come up with the issue by himself.[75] Rather, the issue was raised in Asta’s written outline of reply submissions in the arbitration. Asta submits that the Amasya parties therefore had notice of the issue at least four days before the final oral hearing in the arbitration but that they chose not to address it.[76] In turn, it is submitted that a “reasonable litigant in the position of the [Amasya parties] would have foreseen the possibility that the arbitrator may decide the case as he did, as the idea was expressly traversed in the hearing.”[77] Specifically, Asta argues that:[78]
Given the arbitration agreement required the arbitrator to decide the dispute fairly, it was reasonably foreseeable that it was possible that the arbitrator would find both abandonment and, with the finding that the [Amasya parties] “failed to pay” for the work they have accepted, provide the remedy … [that Asta] sought.
[75]Respondent’s Outline of Submissions (10 May 2016) [24]–[25].
[76]Respondent’s Outline of Submissions (10 May 2016) [24]–[25].
[77]Respondent’s Outline of Submissions (10 May 2016) [25].
[78]Respondent’s Outline of Submissions (10 May 2016) [30] (emphasis in original).
Moreover, Asta submits that the arbitrator was not required to warn or give the parties notice that he was considering the issue because reasoning of the type revealed in the Award was reasonably foreseeable as a potential corollary of what was expressly traversed in written submissions which were exchanged during the arbitration.[79]
[79]Respondent’s Outline of Submissions (10 May 2016) [34] applying Trustees of Rotoaira Forest Trust v Attorney-General [1999] 2 NZLR 452 at 463 (principles (f) and (i)).
The relevant test
In light of the way in which both the Amasya parties and Asta put their respective cases in the applications presently before the Court, it is necessary to clarify the relevant test to be applied in order to determine whether a party was denied natural justice or procedural fairness in an arbitration conducted under the Act, or—if it were applicable—the Model Law. The starting point must be the words of the Act. Section 18 relevantly provides:
18 Equal treatment of parties (cf Model Law Art 18)
The parties must be treated with equality and each party must be given a reasonable opportunity of presenting the party's case.
As set out above, in essence, this section requires that the arbitration be fair. In TCL, the Full Federal Court said the following of art 18 of the Model Law:[80]
There is nothing technical or domestically particular about the requirement that an arbitration be conducted fairly. The conceptions of fairness and equality are deeply powerful. They lie at the heart of the constitutional conception of due process. They are inhering elements of law and justice that inform and bind any legal system and any legal order.
[80](2014) 232 FCR 361 at 383 [73].
As is clear from this passage, art 18 of the Model Law—and, by implication, s 18 of the Act—does not invoke the principles of natural justice or procedural fairness developed in, for example, administrative law,[81] or other common law principles not developed in the context of the Model Law.[82] Such common law principles undoubtedly flow from the same jurisprudential source as art 18 of the Model Law in that they are, fundamentally, concerned with fairness, equality and due process. Indeed, there are many circumstances where these principles may overlap with the requirements of art 18 and may produce similar outcomes. However, ultimately, the requirement of fairness and equality of treatment of the parties in arbitration is distinct from, and often more straightforward in its application than the position developed by the common law in various contexts.
[81]See, eg, Salemi v MacKellar (No 2) (1977) 137 CLR 396; Kioa v West (1985) 159 CLR 550; Administrative Decisions (Judicial Review) Act 1977 (Cth), ss 5(1)(a), 6(1)(a). Cf Applicants’ Outline of Submissions (2 May 2016) fn 10.
[82]Cf Trustees of Rotoaira Forest Trust v Attorney-General [1999] 2 NZLR 452 at 459.
The relevant test is to be drawn from the words of s 18 of the Act itself and may be stated as follows: “Were the parties treated with equality and was each party given a reasonable opportunity of presenting the party’s case?” As is apparent from the reasons that follow, a failure to recognise and apply this test may result in the adoption of an impermissible judicial approach to the question of whether an objecting party was denied procedural fairness or natural justice in breach of the Act. Like any other provision of the Act which mirrors the Model Law, s 18 must not be viewed “through the prism of principles and doctrines not found in the Model Law or the New York Convention, and which may be peculiar to a particular domestic jurisdiction.”[83] The temptation to approach the application of the Act in this way—the temptation of “domesticity”—must be resisted in order to promote uniformity between the application of the Act and the application of the Model Law as required by s 2A of the Act and as emphasised by the Court of Appeal in Subway Systems Australia Pty Ltd v Ireland.[84]
[83]Robotunits Pty Ltd v Mennel (2015) 297 FLR 300 at 306 [14]. See also Indian Farmers Fertiliser Cooperative Ltd v Gutnick (2015) 304 FLR 199 at 209 [23]–[24]. The reference to the “New York Convention” is to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, opened for signature 10 June 1958, 330 UNTS 3 (entered into force 7 June 1959).
[84](2014) 46 VR 49 at 57 [24]–[27].
Trustees of Rotoaira Forest Trust v Attorney-General
Both the Amasya parties and Asta relied heavily on the principles set out by the New Zealand High Court in Trustees of Rotoaira Forest Trust v Attorney-General (“Rotoaira Forest Trust”) as well as many of the common law authorities discussed by Fisher J in that case.[85] The Rotoaira Forest Trust case has been followed in Australia in Castel Electronics Pty Ltd v TCL Air Conditioner (Zhongshan) Co Ltd (No 2)[86] and in Emerald Grain Australia Pty Ltd v Agrocorp International Pte Ltd,[87] and was referred to with qualified approval by the Full Federal Court in TCL.[88] However, in my view, despite providing useful rules of thumb, some of the common law principles set out in Rotoaira Forest Trust are inconsistent with the proper approach to be taken under s 18 of the Act and therefore must be applied with caution.[89]
[85][1999] 2 NZLR 452 at 459–63.
[86](2012) 232 FCR 311 at 352–3 [163]–[164].
[87](2014) 314 ALR 299 at 325–7 [45]–[47].
[88]TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361 at 400 [140]–[141].
[89]Cf United Nations Commission on International Trade Law, UNCITRAL 2012 Digest of Case Law on the Model Law on International Commercial Arbitration (UNCITRAL, 2012) 97–9.
In Rotoaira Forest Trust, Fisher J considered the applicable principles under art 18 of the First Schedule to the Arbitration Act 1996 (NZ) (“the NZ Act”)—which is in relevantly identical terms to art 18 of the Model Law—to an application to set aside an award on the basis that the parties were “not able to make submissions or bring evidence” in relation to a land valuation model adopted by the arbitral tribunal in question.[90] Although the NZ Act did not apply, Fisher J considered that art 18 relevantly reflects the “pre-existing common law”.[91] After reviewing the common law authorities, his Honour summarised the relevant common law principles as follows:[92]
[90]Trustees of Rotoaira Forest Trust v Attorney-General [1999] 2 NZLR 452 at 459.
[91]Trustees of Rotoaira Forest Trust v Attorney-General [1999] 2 NZLR 452 at 459.
[92]Trustees of Rotoaira Forest Trust v Attorney-General [1999] 2 NZLR 452 at 463.
(a)Arbitrators must observe the requirements of natural justice and treat each party equally.
(b)The detailed demands of natural justice in a given case turn on a proper construction of the particular agreement to arbitrate, the nature of the dispute, and any inferences properly to be drawn from the appointment of arbitrators known to have special expertise.
(c)As a minimum each party must be given a full opportunity to present its case.
(d)In the absence of express or implied provisions to the contrary, it will also be necessary that each party be given an opportunity to understand, test and rebut its opponent's case; that there be a hearing of which there is reasonable notice; that the parties and their advisers have the opportunity to be present throughout the hearing; and that each party be given reasonable opportunity to present evidence and argument in support of its own case, test its opponent’s case in cross-examination, and rebut adverse evidence and argument.
(e)In the absence of express or implied agreement to the contrary, the arbitrator will normally be precluded from taking into account evidence or argument extraneous to the hearing without giving the parties further notice and the opportunity to respond.
(f)The last principle extends to the arbitrator’s own opinions and ideas if these were not reasonably foreseeable as potential corollaries of those opinions and ideas which were expressly traversed during the hearing.
(g)On the other hand, an arbitrator is not bound to slavishly adopt the position advocated by one party or the other. It will usually be no cause for surprise that arbitrators make their own assessments of evidentiary weight and credibility, pick and choose between different aspects of an expert’s evidence, reshuffle the way in which different concepts have been combined, make their own value judgments between the extremes presented, and exercise reasonable latitude in drawing their own conclusions from the material presented.
(h)Nor is an arbitrator under any general obligation to disclose what he is minded to decide so that the parties may have a further opportunity of criticising his mental processes before he finally commits himself.
(i)It follows from these principles that when it comes to ideas rather than facts, the overriding task for the plaintiff is to show that a reasonable litigant in his shoes would not have foreseen the possibility of reasoning of the type revealed in the award, and further that with adequate notice it might have been possible to persuade the arbitrator to a different result.
(j)Once it is shown that there was significant surprise it will usually be reasonable to assume procedural prejudice in the absence of indications to the contrary.
Of these common law principles, Fisher J identified “surprise and potential prejudice” as the “key elements”.[93] In relation to these two key elements his Honour said:[94]
Of the two, surprise is the more important. Once it is shown that the fact or idea introduced by the decision maker had not been reasonably foreseeable, it will be a very short step indeed to the possibility that a party was procedurally prejudiced.
[93]Trustees of Rotoaira Forest Trust v Attorney-General [1999] 2 NZLR 452 at 461.
[94]Trustees of Rotoaira Forest Trust v Attorney-General [1999] 2 NZLR 452 at 462.
In the later decision of Methanex Motunui Ltd v Spellman (“Methanex”), Fisher J referred to his discussion of the common law principles in Rotoaira Forest Trust and said:[95]
[160]… In the end the unifying question at common law is whether a reasonable litigant placed in the shoes of the objecting party would have foreseen the possibility of reasoning of the type revealed in the award, and hence had the opportunity to present evidence and argument in anticipation of it …
[161]… The overriding objective is to avoid surprise, and therefore lack of opportunity to respond in the way that the parties had envisaged when setting up the arbitration. …
[95][2004] 1 NZLR 95 at 136 [160]–[161].
In TCL, the Full Federal Court referred to Rotoaira Forest Trust and Methanex as being “not in any way inconsistent with the … expression of principle and approach” set out in TCL.[96] That is, the Full Court considered the New Zealand cases to be not in any way inconsistent with the general proposition that an award will not be set aside or refused recognition or enforcement unless “real unfairness or real practical injustice” can be shown.[97] In this context, the Full Court referred to the summary of the relevant common law principles in Rotoaira Forest Trust as a “helpful … but not determinative, expression of approach”.[98] Their Honours then made particular reference to the principles set out by Fisher J at (b), (e), (f), (g), (i) and (j).
[96]TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361 at 400 [140].
[97]TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361 at 376–7 [55], 395 [113], 400 [141]–[142].
[98]TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361 at 400 [141].
I would respectfully agree with what was said by the Full Court in TCL.In my opinion and subject to the following qualifications, the common law principles set out in Rotoaira Forest Trust provide a helpful indication of the kinds of things which may result in a breach of s 18 of the Act. Moreover, they provide useful guidance in terms of how a denial of natural justice or procedural fairness may be identified by an objecting party or, for that matter, by a court. However, these common law principles do not state the relevant test and caution must be exercised in their application in order to avoid reducing the question of whether there has been a denial of natural justice or procedural fairness to “black-letter rules”.[99] Moreover, as the reasons that follow show and as demonstrated by the parties’ submissions in these proceedings, the focus of the common law on the elements of surprise and procedural prejudice to the objecting party is problematic because it invites consideration of the merits upon which the award in question was made.
[99]TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361 at 376 [54].
Merits are irrelevant
In my view, the principles set out by Fisher J in Rotoaira Forest Trust at (f), (i) and (j) in particular go beyond the realms of permissible inquiry under s 18 of the Act and offend the policy of minimal curial intervention mandated by the Model Law, and, in turn, by the Act.[100] The Model Law approach appears to diverge from the common law position to the extent that the common law emphasises surprise and procedural prejudice as key elements to showing a denial of natural justice or procedural fairness. These elements are neither sufficient nor necessary to establish breach of art 18 of the Model Law or s 18 of the Act. That is not to say that a surprise decision by an arbitral tribunal or the demonstration of procedural prejudice in a general sense cannot constitute a breach of s 18 of the Act. Indeed, the demonstration of such matters within the relevant legislative context may well help show that a party has been treated unfairly. However, in the context of the judicial approach mandated by the Act, problems arise where the demonstration of these elements depends on an assessment of the merits of the reasoning contained in an arbitral award.[101]
[100]Trustees of Rotoaira Forest Trust v Attorney-General [1999] 2 NZLR 452 at 463.
[101]As to the judicial approach mandated by the Act and the Model Law: see above [16]–[24].
To begin with, consideration of whether a finding or the reasoning of an arbitral tribunal was “reasonably foreseeable” will often, if not always, involve assessing the relative merits of competing opinions and ideas as to questions of fact or law which were either expressed by the parties in the arbitration or thought of by the arbitral tribunal itself. For example, in the present proceedings, the Amasya parties submit that a reasonable litigant in their position would not have foreseen the arbitrator’s finding that Asta was entitled to a quantum meruit on the basis that the Contract had been mutually abandoned. This is because, even though Asta raised the possibility of an entitlement to be paid on a quantum meruit basis as a consequence of mutual abandonment, Asta’s submission was—according to the Amasya parties—simply “incoherent”[102] and “untenable”.[103] In order to determine whether the arbitrator’s finding was reasonably foreseeable then, it would be necessary to at least address, if not decide, the question of whether an entitlement to be paid on a quantum meruit basis may arise as a result of the mutual abandonment of a contract.
[102]Applicants’ Outline of Submissions (2 May 2016) [21].
[103]Transcript 39. The Amasya parties also argue that the arbitrator did not adopt Asta’s submission in any event: see below [66]–[70].
The discordance of approach between the common law and s 18 of the Act is more pronounced when it comes to considering whether the objecting party has suffered procedural prejudice at common law. As summarised by Fisher J in Rotoaira Forest Trust, at common law, when it comes to legal conclusions, the objecting party is required to show both that the legal conclusion was not reasonably foreseeable, and “that with adequate notice it might have been possible to persuade the arbitrator to a different result.”[104] Clearly, determining whether it might have been possible to persuade the arbitrator to a different result involves engaging with the arbitral award on its merits. That the common law approach may lead to this kind of impermissible reasoning is evident in the way in which the Amasya parties, in particular, put their submissions in these proceedings. Incidentally, these submissions also help highlight the kind of unfairness to which s 18 of the Act is not directed.
[104]Trustees of Rotoaira Forest Trust v Attorney-General [1999] 2 NZLR 452 at 463 (i). See Mahon v Air New Zealand Ltd [1984] AC 808 at 821.
Although the Amasya parties do not seek to mount a merits appeal, they do, nevertheless, seek to show that the arbitrator made an error of law by finding that Asta was entitled to its claim on a quantum meruit basis. At the hearing of these applications, Senior Counsel explained the Amasya parties’ argument as follows:[105]
[105]Transcript 9–10 (emphasis added). For the reasons set out above at [25]–[30], Senior Counsel’s reference to “s 34” may be read as a reference to the relevant provisions of both ss 18 and 34 of the Act.
My principal argument is that the arbitrator has made the Award on a basis [that] was not put, and had it been put there were good arguments that could have been marshalled to the arbitrator, and that's the denial of procedural fairness.
…
Now there would be no point me making that submission if the arbitrator's decision as a matter of law was beyond argument. The reason I'm taking Your Honour to legal principle is to demonstrate the unfairness … which occurred. Because our submission is that the arbitrator went off on a frolic, he went off on a frolic of his own.
…
He referred to text[s] which neither party has drawn to his attention. And our submission ultimately is that the arbitrator fundamentally misunderstood what was in the text[s] which he cited. Now to do that without giving the parties an opportunity to address him on this new cause of action [led] to practical substantial unfairness thereby engaging the relevant provisions in s 34 upon which we rely.
…
That is the primary way in which we put our case. We are certainly not asking the court to review the decision [on] the merits. But the merits of the argument, however, [are] relevant in assessing the unfairness.
These submissions draw heavily on the common law principles set out by Fisher J in Rotoaira Forest Trust. In my opinion, they accurately describe the rationale behind the common law requirement that the objecting party show that it has been procedurally prejudiced, and, more particularly, that, with adequate notice, it might have been possible to convince the arbitrator to find differently.[106] Indeed, at common law, there would be no point arguing that an award was made on a basis that was not put by the parties if, as Senior Counsel put it, “the arbitrator’s decision as a matter of law was beyond argument”—that is, if there was no possibility that the arbitrator might have found differently had the parties been given a chance to make submissions on the issue in question.[107] This is because, in these circumstances, there would be no procedural prejudice to the objecting party at common law.
[106]Trustees of Rotoaira Forest Trust v Attorney-General [1999] 2 NZLR 452 at 463 (i). See Mahon v Air New Zealand Ltd [1984] AC 808 at 821.
[107]Transcript 9.
To this extent, the rationale behind s 18 of the Act is different to that of the common law and there is no requirement that the objecting party show procedural prejudice in this way. Instead, a denial of natural justice or procedural fairness is assumed where the parties are not treated with equality, or where each party does not have a reasonable opportunity of presenting the party’s case. Whether an arbitrator made an error of fact or law is wholly irrelevant to that test. It follows that whether or not the arbitrator might have arrived at a different conclusion had the arbitration played out differently is also irrelevant. The point may be demonstrated by way of the following hypothetical:
One of the issues arising in an arbitration between Party A and Party B is the question of whether a trustee may be the sole beneficiary of a trust. Party A is given a reasonable opportunity to address the issue and argues that in some circumstances a trustee may be the sole beneficiary of a trust. Party B’s case is that Party A’s argument is wrong and simply implausible as a matter of law, but Party B is not given a reasonable opportunity to present its case. Contrary to all authority, the arbitrator accepts Party A’s argument and finds that in some circumstances a trustee may be the sole beneficiary of a trust and proceeds to make an award in favour of Party A on that basis.
It follows from the preceding reasons that s 18 of the Act did not require the arbitrator to warn or communicate with the parties in relation to the findings in question.[141] This is because the issue was raised in Asta’s Reply and was therefore “part of the debate at the arbitration.”[142] The present case may therefore be distinguished on its facts from the English cases of Fox v PG Wellfair Ltd (in liq),[143] and The Vimeira,[144] which were relied upon by the Amasya parties,[145] where the issues about which the objecting parties complained were never raised as issues in the arbitrations in question. As already indicated, the present case may also be distinguished on its facts from the English case of Société Franco-Tunisienne D'Armement-Tunis v Ceylon; The Massalia (“The Massalia”) which was also relied upon by the Amasya parties.[146] In that case, the issue in question was raised but not in such a way as to enable the relevant party to “deal with it.”[147] For the reasons that follow, the present case differs from The Massalia because I am satisfied that the opportunity given to the Amasya parties amounted to a reasonable opportunity to present their case.[148]
[141]See Terna Bahrain Holding Co WLL v Bin Kamil Al Shamsi [2013] 2 CLC 1 at 22–3 [85].
[142]TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361 at 375 [44] cited in Applicants’ Outline of Submissions (2 May 2016) [41].
[143]Fox v PG Wellfair Ltd (in liq) [1981] 2 Lloyd’s Rep 514 at 521.
[144]Interbulk Ltd v Aiden Shipping Co Ltd; The Vimeira [1984] 2 Lloyd’s Rep 66 at 74.
[145]Applicants’ Outline of Submissions (2 May 2016) [31]–[32], [36].
[146][1959] 1 WLR 787 at 799–800.
[147]Société Franco-Tunisienne D'Armement-Tunis v Ceylon; The Massalia [1959] 1 WLR 787 at 799: “I have no doubt that something was said”.
[148]See below [82]–[92].
Further, I am satisfied that the fact that the issue in question was only ever raised in written submissions and not during oral argument makes no difference to the above conclusions. I would again respectfully adopt the reasoning of Popplewell J in Terna Bahrain on this point. Immediately following the passage set out above, his Honour said:[149]
Nor is there anything unfair about a point not being specifically addressed during oral argument. In ICC arbitrations, proceedings are often dominated by submissions being made in writing rather than orally. An issue raised in written submissions does not have to be drawn attention to during any hearing, or mentioned or developed orally, in order for the other side to have a fair opportunity of dealing with it.
[149]Terna Bahrain Holding Co WLL v Bin Kamil Al Shamsi [2013] 2 CLC 1 at 29 [107]. The reference by Popplewell J to “ICC arbitrations” is to arbitrations conducted under the ICC Rules of Arbitration of the International Chamber of Commerce: < type="1">
Again, the overriding consideration is whether the arbitration was conducted fairly.[150] Whether an issue is raised orally or in writing makes no difference to the fact of it being raised and thereby giving the objecting party an opportunity to respond. That being said, the timing and form in which the issue is raised may be relevant to the question of whether the opportunity created amounts to a reasonable opportunity to present the party’s case.[151]
[150]See Interbulk Ltd v Aiden Shipping Co Ltd; The Vimeira [1984] 2 Lloyd’s Rep 66 at 75.
[151]See below [82], [84]–[86].
Finally in relation to the question of whether the Amasya parties had an opportunity of the relevant kind, it is submitted that none of the parties referred the arbitrator to the two texts upon which he relied in support of the proposition that a builder may be entitled to payment on a quantum meruit basis as a consequence of the mutual abandonment of a contract.[152] In my view, the fact that the arbitrator conducted some limited legal research on an issue raised in the arbitration and to which the Amasya parties therefore had an opportunity to respond does not alter the above analysis. As Fisher J said in Rotoaira Forest Trust:[153]
[A]n arbitrator is not bound to slavishly adopt the position advocated by one party or the other. It will usually be no cause for surprise that arbitrators make their own assessments of evidentiary weight and credibility, pick and choose between different aspects of an expert's evidence, reshuffle the way in which different concepts have been combined, make their own value judgments between the extremes presented, and exercise reasonable latitude in drawing their own conclusions from the material presented.
[152]Transcript 39. See Award [964], [971] where the arbitrator referred to Julian Bailey, Construction Law (Informa, 2011) and Damian Cremean, Michael Whitten and Michael Sharkey, Brooking on Building Contracts (LexisNexis, 5th ed, 2015).
[153]Trustees of Rotoaira Forest Trust v Attorney-General [1999] 2 NZLR 452 at 463 (g).
Although this statement of principle is predominantly concerned with evidential findings, Fisher J’s general observation that arbitrators are not bound to “slavishly adopt the position advocated by one party or the other” is, in my view, also applicable to questions of law in certain circumstances. Indeed, in circumstances where an arbitrator is an experienced commercial lawyer it will not necessarily be unfair if the arbitrator refers to legal authorities which, in the arbitrator’s opinion, support the position advocated for by one or other of the parties. This is particularly so where the authorities referred to are well-known, standard texts, such as those relied upon by the arbitrator in this case. This may be so even if the parties did not expressly refer the arbitrator to those authorities if, as in the present case, the arbitrator considers the applicable principles not to be in dispute.[154] Whether or not the applicable principles are in fact disputable, or whether or not the additional authorities referred to by the arbitrator in fact support the proposition for which they are cited is, for the preceding reasons, irrelevant.[155]
[154]Award [972].
[155]See above [50]–[58]. Cf Applicants’ Outline of Submissions (2 May 2016) [26]–[29]; Transcript 17–31.
Here, the arbitrator cited two well-known, standard texts to which the parties did not refer. However, the proposition for which those two texts were cited—namely the issue about which the Amasya parties now complain—was raised in the arbitration and the Amasya parties had an opportunity to deal with it. As a result, the arbitrator’s reliance on the two texts in question did not result in any unfairness to the Amasya parties within the meaning of s 18 of the Act. In my view, in the circumstances of this case, to find otherwise would be contrary to the paramount object of the Act to “facilitate the fair and final resolution of commercial disputes by impartial arbitral tribunals without unnecessary delay or expense.”[156]
[156]Commercial Arbitration Act 2011, s 1AC(1).
Did the opportunity amount to a “reasonable opportunity”?
Finally, in order to determine whether the Amasya parties were denied procedural fairness or natural justice it is necessary to determine whether the opportunity identified above amounted to a reasonable opportunity to present the Amasya parties’ case.[157] The determination of this question is, unsurprisingly, highly context dependent and must be assessed in light of all the circumstances of the case.[158] Relevant circumstances in this case include the fact that the issue was first raised in written submissions in reply which were given to the objecting party on a Friday, three full days before the final oral hearing in the arbitration which was scheduled for and took place on the following Tuesday. Other relevant circumstances include the way in which the arbitration had been conducted up until the issue was raised, as well as the nature and apparent complexity of the issue raised and the time and resources required to prepare an adequate response.
[157]See Transcript 60–1.
[158]See Cameron Australasia Pty Ltd v AED Oil Ltd [2015] VSC 163, [35]; Sauber Motorsport AG v Giedo van der Garde BV (2015) 317 ALR 786 at 789 [8] citing TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361 at 388 [85]; Dongwoo Mann+Hummel Co Ltd v Mann+Hummel GmbH [2008] 3 SLR(R) 871 at 892 [55].
For the reasons that follow, and in consideration of these relevant circumstances, I am of the view that the opportunity given to the Amasya parties amounted to a reasonable opportunity to present their case. As a result, I am satisfied that s 18 of the Act has been complied with and that the Amasya parties were therefore neither unable to present their case, nor denied procedural fairness or natural justice.
In their submissions in this Court, the Amasya parties emphasised the background and procedural history of the arbitration.[159] Moreover, the evidence of the Amasya parties’ solicitor in the arbitration was that the arbitration “was conducted a lot like a court case.”[160] As already indicated, the way in which the arbitration was conducted is a relevant circumstance when considering whether the opportunity given to the objecting party amounted to a reasonable opportunity to present that party’s case. This is particularly so where the issue raised has not been raised previously and may amount to a new claim in the arbitration. In light of general practice and procedure in commercial litigation in this State, it would have been understandable if the Amasya parties anticipated that the issues in dispute and the remedies sought would be raised in a form resembling a formal pleading in a court proceeding. This is particularly so in circumstances where the parties’ Notices of Dispute and Notices of Defence, which were given pursuant to the arbitration agreement in cl 32.1 of the Contract, in fact resembled the kind of formal pleading documents which may be found on a court file.
[159]See above [5]–[12]. See Applicants’ Outline of Submissions (2 May 2016) [5]–[13]; Transcript 32.
[160]Second Boden Affidavit [13].
However, this does not mean that the parties were entitled to assume that claims submitted to arbitration could not be amended or supplemented once the core issues in dispute had crystallised, or that the parties’ claims could only be amended or supplemented in accordance with the rules governing court procedure, or by making an application to the arbitrator. This is consistent with s 23(3) of the Act which provides that:[161]
Unless otherwise agreed by the parties, either party may amend or supplement the party’s claim or defence during the course of the arbitral proceedings, unless the arbitral tribunal considers it inappropriate to allow such amendment having regard to the delay in making it.
[161]See also s 23(4) of the Act which provides that statements of claim and defence, such as the Notices of Dispute and Notices of Defence in this case, are not required to be in a particular form.
The parties expressly agreed that the arbitrator was “not bound to apply the rules of evidence and procedure”,[162] and at the preliminary conference in the arbitration held on 9 June 2015 the parties “confirmed that the adoption of Rules was unnecessary.”[163] There is nothing unusual about this aspect of the arbitration agreement or about the parties’ decision not to adopt rules to govern the arbitral procedure. Where appropriate these kinds of arrangements enable commercial disputes to be resolved more cost-effectively, informally and quickly than might otherwise be the case. All that was required was that the parties be given a reasonable opportunity to present their case, including a reasonable opportunity to respond to any amended or supplemented claim. There is no suggestion that the Amasya parties, as the objecting parties, were not aware of the issue, or that the form in which the issue was raised—in written submissions in reply—somehow caused the Amasya parties to overlook it. In the circumstances then, I am not satisfied that the way in which the arbitration was conducted, or the fact that the issue raised by Asta’s Reply may have amounted to an amended or supplemented claim, indicates that the opportunity given to the Amasya parties to present their case that Asta’s submission should be rejected was somehow unreasonable.
[162]Contract, cl 32.1(d).
[163]Second Boden Affidavit, Exhibit KB-12, 6.
The Amasya parties seek to explain their failure to address the issue raised by para 59 of Asta’s Reply at the final hearing by arguing that a “reasonable party is entitled to ignore such an incoherent submission.”[164] However, even if Asta’s submission was as patently and as obviously wrong as the Amasya parties seek to characterise it as—which is both unnecessary and impermissible to decide in any event—this does not indicate that the opportunity given to the Amasya parties to address it was not reasonable. Moreover, the fact that the arbitrator did not share the Amasya parties’ view that para 59 of Asta’s Reply could be ignored does not indicate any unfairness in the relevant sense.
[164]Transcript 60.
In my view, the nature and complexity of an issue that has been raised is a relevant consideration when determining whether there was a reasonable opportunity to present the party’s case on that issue. The Amasya parties made the following straightforward submission in this Court, referring to para 59 of Asta’s Reply:[165]
That submission was incoherent. Further it overlooked the fact (which was uncontested) that Asta had been paid $2,912,804 for the partially constructed works. There was no basis to think that the consideration had failed, and no authorities were cited in support.
[165]Applicants’ Outline of Submissions (2 May 2016) [21].
That submission, at a minimum, could easily have been made to the arbitrator at the final oral hearing. But it was not made. The Amasya parties had three full days to consider the issue and to consider their response to it. Among other courses of action, they could have invited the arbitrator to “reject it without addressing it in detail … in order to avoid the risk of giving it more weight and prominence” than they thought it deserved.[166] They chose not to do this and have now come to regret that decision.
[166]Terna Bahrain Holding Co WLL v Bin Kamil Al Shamsi [2013] 2 CLC 1 at 28 [106].
Finally, the Amasya parties submit that the circumstances of this case are analogous to those considered in AKN v ALC.[167] In that case, the Singapore Court of Appeal held that the objecting parties did not have “ample notice” of an issue that was raised in the arbitration “at the eleventh hour.”[168] However, in my view, there are critical differences between the circumstances considered in AKN v ALC and the circumstances of the present case. In that case, the objecting parties were only given notice of the issue in question on the final day of the hearing in the arbitration. The issue was raised by the arbitral tribunal in a five-minute exchange with counsel for the successful parties between 11:40am and 11:45am on the last day of a 20-day hearing.[169] The arbitral tribunal did not give any of the parties an opportunity to adduce further evidence or to address the tribunal further on the issue despite the tribunal suggesting that further submissions or evidence might be needed.[170]
[167][2015] SGCA 18. See Applicants’ Outline of Submissions (2 May 2016) [45]; Transcript 37, 60.
[168]AKN v ALC [2015] SGCA 18, [78].
[169]AKN v ALC [2015] SGCA 18, [69].
[170]AKN v ALC [2015] SGCA 18, [69], [75].
The circumstances of the present case are quite obviously different to those considered by the Singapore Court of Appeal. Here, the issue was raised by a party in written submissions which were given to the objecting party in preparation for a final one-day hearing. This followed a seven-day evidentiary hearing which had concluded over two months earlier. Unlike the objecting parties in AKN v ALC, the Amasya parties had three full days to read, consider and prepare a response to the issue, or to prepare an application to adjourn the final oral hearing if they were of the view that this might have been required in order to allow them a reasonable opportunity to present their case. No such application was made and the issue was not mentioned at the final oral hearing.
I am therefore of the opinion that the Amasya parties had ample notice of the issue of whether Asta was entitled to payment on a quantum meruit basis as a consequence of a finding that the Contract had been mutually abandoned.[171] Accordingly, the opportunity to address the issue amounted to a reasonable opportunity to present the Amasya parties’ case and there has been no denial of procedural fairness or natural justice. It follows that the Amasya parties have failed to demonstrate any “real unfairness or real practical injustice” in the way in which the arbitration was conducted,[172] and that they have failed to establish either the “unable to present its case” ground or the “public policy” ground under the Act.[173] The Award will therefore be enforced.
[171]Cf AKN v ALC [2015] SGCA 18, [78].
[172]TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361 at 376–7 [55]. See also at 394 [111], 395 [113].
[173]Commercial Arbitration Act 2011, ss 34(2)(a)(ii), (b)(ii), 36(1)(a)(ii), (b)(ii).
Should the Award be set aside as it applies to Mr Tercan?
In the Award, the arbitrator found that Mr Tercan, as guarantor under the Contract, is both a party to the Contract and to the arbitration agreement.[174] The Amasya parties submit that the Award should be set aside because Mr Tercan was not a party to the arbitration agreement. However, both the Amasya parties’ and Asta’s submissions on this issue hardly go any further than reciting the reasons given by the arbitrator in the Award for this finding and agreeing or disagreeing depending on the party perspective. The Court was not assisted by the parties’ submissions in this regard. The question of whether the Award should be set aside as it applies to Mr Tercan will therefore be reserved and I will hear the parties further on this issue.
[174]Award [130].
Conclusions and orders
For the preceding reasons, the Amasya parties’ application to set aside the Award under s 34 of the Act in proceeding number S CI 2016 01359 fails. As a consequence, and given that enforcement is not sought as against Mr Tercan,[175] there are no grounds for resisting enforcement of the Award under s 36 of the Act. Asta’s application to enforce the Award under s 35 of the Act in proceeding number S CI 2016 01254 is therefore successful.
[175]Mr Tercan is not named as a party to the enforcement application in proceeding number S CI 2016 01254.
The following matters are reserved and I will hear the parties further on these issues:
(a) Whether the Award should be set aside as it applies to Mr Tercan;
(b) Whether the Amasya parties should be granted leave to amend the Originating Application to Set Aside Award in order to seek to set aside the Costs Award; and
(c) Liability for costs in these proceedings.
The parties are to bring in orders to give effect to these reasons.
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