AWB (International) Ltd v Tradesmen International (PVT) Ltd
[2005] VSC 350
•1 September 2005
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
ADMIRALTY LIST
No. 5253 of 2005
| AWB (INTERNATIONAL) LTD (ACN 081 890 413) | Plaintiff |
| v | |
| TRADESMEN INTERNATIONAL (PVT) LTD | Defendant |
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No. 7161 of 2005
| TRADESMEN INTERNATIONAL (PVT) LTD | Plaintiff |
| v | |
| AWB (INTERNATIONAL) LTD (ACN 081 890 413) | Defendant |
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JUDGE: | BYRNE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 25 August 2005 | |
DATE OF JUDGMENT: | 1 September 2005 | |
CASE MAY BE CITED AS: | AWB (International) v Tradesmen International (Revised 2 September 2005) | |
MEDIUM NEUTRAL CITATION: | [2005] VSC 350 | |
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ARBITRATION – appeal – application for leave to appeal – manifest error on the face of the award – whether determination of the question likely to add substantially to the certainty of commercial law - time bar – meaning of ‘final port of discharge”.
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APPEARANCES: | Counsel | Solicitors |
| For AWB (International) Ltd | Mr H.N.G. Austin | Blake Dawson Waldron |
| For Tradesmen International (Pvt) Ltd | Mr Michael Thompson | Monahan + Rowell (Agents for Norman Waterhouse (Sydney)) |
HIS HONOUR:
By an agreement in writing dated 14 January 2004 made between AWB (International) Limited as seller and Tradesmen International (PVT) Ltd as buyer, AWB sold to Tradesmen 150,000 tonnes of wheat, CFR for delivery in Pakistan. The agreement, under the heading “Destination” provided as follows:
“One safe port, one to two safe berth each, Port Qasim/Karachi Port, Pakistan.”
Karachi Port is the premier port of Pakistan; Port Qasim is the second port of that country, situated 50 kms south of Karachi on the Arabian sea. The sale agreement provided that AWB would arrange transportation from the loadport as per “Austwheat 1990” charter party with an arrival date at discharge port of 22 February 2004. The agreement, in clause 4, prohibits transhipment and in clause 3 provides as follows:
“This wheat is specifically for milling within Pakistan and cannot be resold or traded to other mills/traders outside Pakistan, without prior permission of the Seller.”
The wheat was despatched in four ships, all of which arrived at the discharge port in Pakistan. The last, MV Sea Swan, arrived on 2 March 2004. There, the wheat was rejected by the Pakistani government on the ground of deficient quality. I am not here concerned with the details of these complaints, their validity or their contractual significance.
By reason of this rejection, the cargo on the MVC Swan was not discharged in Karachi[1] but was on-shipped to Jakarta, Indonesia where it was discharged. The vessel arrived at this discharge port on 7 April 2004.
[1]It is not clear whether the three earlier shipments were discharged in Pakistan.
The sale agreement contains an arbitration clause in the following terms:
“15 (i)Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the UNCITRAL Arbitration Rules for the time being in force. The administering authority shall be the Australian Centre for International Commercial Arbitration, Melbourne. Each party shall appoint an arbitrator, the two arbitrators thus appointed shall choose a third arbitrator who shall act as the presiding arbitrator of the tribunal.
The language of the arbitration shall be English and the place of the arbitration shall be Melbourne. The arbitration shall be governed by the Commercial Arbitration Act 1984 of the State of Victoria.
(ii)Any notice of arbitration or other claim alleging a dispute must be made in writing and the claimants arbitrator appointed within six (6) months of the vessels arrival at the final port of discharge, otherwise the claim shall be deemed to be waived and no proceedings whatsoever whether by way of arbitration or litigation shall be commenced.”
It will be noted that sub-clause (ii) appears to have been modelled on the Centrocon time bar clause which is in these terms:
“… Any claim must be made in writing and claimant’s arbitrator appointed within three months of final discharge, and where this provision is not complied with the claim shall be deemed to be waived and absolutely barred... “
Tradesmen has sought to commence an arbitration. On 2 September 2004, it sent by fax the following letter to AWB:
“This is further to our letter dated: 26-02-2004, we hereby give notice of arbitration under the terms of the above contract.
We have appointed Mr Bruce Harris Flat No. 101, 7 High Holborn, London WC1V6DR Tel: 44-207 404 9823, Fax: 44 207 404 9824. as arbitrator to represent us in the arbitration proceedings.”
It was accepted on behalf of AWB that the notice contained in this letter was given within the six month period stipulated in clause 15(ii).
On or about 6 October 2004, without prejudice to its position generally, AWB appointed as arbitrator Mr Ronald Salter. Mr Harris and Mr Salter then chose Mr Phillip Yang as the third arbitrator pursuant to Article 7(1) of the UNCITRAL Rules.
On 13 September 2004, Tradesmen sent a second, and more formal and comprehensive, notice of arbitration. It was accepted before me that, if given within time, this second notice was effective to satisfy the time bar clause and to commence the arbitration.
The parties then referred to the Arbitral Tribunal two preliminary issues:
(i)whether there exists any valid or subsisting agreement to arbitrate between the parties, and
(ii)whether, if there is a subsisting agreement to arbitrate, Tradesmen’s purported notice of arbitration is time barred.
Having received evidence and considered the party’s submissions, the Arbitral Tribunal on 1 March 2005 published its reasoned interim award. It dealt with the two preliminary questions in this way:
“WE AWARD, ADJUDGE AND DECLARE that there exists a valid and subsisting agreement to arbitrate between the parties, and that Tradesmen’s purported notices of arbitration are not time-barred.”
AWB, being dissatisfied with the decision with respect to question (ii), has commenced proceeding No 5253 of 2005 seeking leave to appeal against the interim award. Tradesmen, in proceeding No. 7161 of 2005, seeks leave to cross-appeal in the event that the AWB appeal is successful.
It is necessary at this stage that I identify the positions of the parties in the light of the determinations of the Arbitral Tribunal on the issues raised, so as to explain the nature of these proposed appeals. The tribunal concluded as follows:
(1)On their proper construction, the words in clause 15(ii), “the final port of discharge”, mean the port at which the cargo was in fact discharged that is, Jakarta, Indonesia. Accordingly, time began to run for the purposes of clause 15(ii) on 7 April 2004 and expired six months later. The first and second notices were, therefore, within time.
(2)A notice required by clause 15(ii) must comply with the requirements of the UNCITRAL Rules, Article 3.3.
(3)The first notice did not comply with the requirements of Article 3.3.
(4)If, however, compliance with Article 3.3 was not required, the first notice did satisfy the requirements of clause 15(ii).
(5)The second notice was sufficient on any basis.
AWB in its proceeding seeks to challenge conclusion (1) as to the construction of clause 15(ii), with the consequences that time, which commenced to run on 3 March 2004, expired on 2 September 2004 and that the second notice was therefore out of time. If AWB fails in this challenge, the arbitration may go forward.
If, on the other hand, AWB succeeds in this challenge, the claim, the subject of the arbitration is barred unless the first notice is effective. In this event, Tradesmen seeks in its cross proceeding to challenge conclusions (2) and (3), arguing that the Arbitral Tribunal erred in determining that the notice under cl. 15(ii) must comply with the requirements of the UNCITRAL Rules. In the alternative it argues that the first notice satisfied these requirements. If Tradesmen fails on both these contentions, the claim is barred. If Tradesmen succeeds on either of these contentions the arbitration may go forward.
It was accepted by the parties that, notwithstanding that this is an international arbitration, the agreement between the parties in clause 15 had the effect that the appeals were governed by Part V of the Commercial Arbitration Act 1984 (Vic). I proceed on that basis. By s 38, an appeal may be brought on a question of law arising out of an award only where the parties agree or the Court grants leave. No agreement is here present.
The granting of leave by the Court is governed by s 38(5). In brief, the sub-section prohibits the grant of leave unless two requirements are both satisfied. The first, that the determination of the question of law could substantially effect the rights of the parties, was accepted in this case. The contest before me concerned the second requirement contained in s. 38(5)(b):
“(5)The supreme Court shall not grant leave under sub-section (4)(b) unless it considers that –
…
(b) there is –
(i) a manifest error of law on the face of the award; or
(ii)strong evidence that the arbitrator or umpire made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law.
Counsel for AWB contended that either of paragraphs (i) or (ii) of s. 38(5)(b) was here satisfied, so that I am at liberty to grant the leave his client sought.
Manifest error on the face of the award
For the purposes of s.38(5)(b)(i), I look to the award. This includes the reasons for it and, in this case, the terms of the agreement whose construction was said to amount to an error of law. It was accepted that, in order to establish the existence of a manifest error, the plaintiff must demonstrate that the construction of the agreement accepted by the Arbitral Tribunal was erroneous and, further, that the error is clearly apparent, without prolonged adversarial argument[2] or that it is evident and obvious.[3] Arguable error is not sufficient.[4] It follows that, if the impugned construction of the agreement is fairly open, leave cannot be granted under paragraph (i).
[2]See Promenade Investments P/L v State of New South Wales (1992) 26 NSWLR 203 at 226 per Sheller JA; Energy Brix Australia Corp P/L v National Logistics Coordination (Morwell) P/L (2002) 5 VR 353 at 368 [31], per Ormiston JA, Winneke P, Phillips, Buchanan and Vincent JJA concurring.
[3]Fluor Australia Pty Ltd v Anaconda Operations Pty Ltd [2003] VSC 276 at [25], per Dodds-Streeton J.
[4]Natoli v Walker unreported CA(NSW) 26 May 1994, BC9402554.
It was put on behalf of AWB that the contract contemplated only one port of discharge, or perhaps two, Port Qasim or Karachi Port in Pakistan. Unlike the true Centrocon clause, where time runs from “final discharge” time is here fixed by reference to the date of arrival at a port where discharge is contractually to take place, whether it does in fact or not. An elaborate series of arguments were then directed to demonstrate that this is what the parties might be taken to have intended at the time of contract and as to the commercial practicality of such a construction. All of this may be accepted. The fact remains that in the terminology of clause 15(2), “port of discharge” differs from “discharge port” which is used elsewhere in the agreement to refer to the contractual place of delivery. Furthermore, the inclusion of the word “final” in the expression “final port of discharge” suggests that the place there identified might be some place other than that contractual place of delivery. In short, I have read the reasons of the Arbitral Tribunal and find no manifest error. To my mind, the construction which the arbitrators preferred is very persuasive, if not correct.
Error of law
There are in fact two components to paragraph (ii) of s. 38(5)(b), each of which must be satisfied; strong evidence of error of law, and that “the determination of the question may add or be likely to add, substantially to the certainty of commercial law.”
I shall first address the second component for it is here that the AWB argument fails. The proposed appeal turns on the terminology of a contract. Richard Ashenden Harris, AWB’s corporate counsel, in his affidavit sworn 6 April 2005, says this:
“23.This time bar clause is incorporated into the standard form of sale contract used by [AWB] in the conduct of its business of selling wheat for export. [AWB] uses this clause in a substantial number of sale contracts per year and an authoritative determination of its meaning in the circumstances of this case would be of great value to those engaged in these and similar transactions.”
It is not suggested that the proper construction of clause 15(ii) of this contract is otherwise of interest to the commercial community. It has not been demonstrated to me how the determination of the question of law would be of great value to those engaged in “similar transactions.” There is no evidence to show that the difficulties which require the determination of the question of law in this case are frequent in occurrence or that any such difficulty is presently pending. I do not overlook the dictate of the statute that the determination be likely, not only to add to the certainty of commercial law, but that this be substantial. If it is a matter of ongoing concern to AWB, in its future dealings with its customers, what its documentation might mean notwithstanding the guidance given as to this by the Arbitral Tribunal, it can always modify its form of agreement.
It is not therefore necessary that I enter upon an examination of what is meant by the first component of s. 38(5)(b)(ii). It is sufficient that I say that, to my mind, the interpretation accepted by the Arbitral Tribunal is probably correct. There is, therefore, no strong evidence of error. It follows, that the AWB proceeding must be dismissed.
The Cross Appeal
I was invited to consider the alternative submissions of the party in case I should be found to be in error in this conclusion. The consequence of this assumption would be that leave should be granted to AWB. The further consequence, given the terminology of s 38(5)(b), must be that the appeal would succeed.
In that event, it would be necessary to turn to the cross-application. This raises the procedural question whether Tradesmen, as would-be cross-appellant, must itself seek and obtain leave to appeal against the Arbitral Tribunal’s conclusions (2) and (3)[5], as it seeks to do in its proceeding. As to this, counsel for AWB conceded that it was not necessary for Tradesmen to obtain leave to cross-appeal in respect of its complaints about the Arbitral Tribunal’s reasons for award, for, so doing, it is simply reactive to the AWB appeal. Likewise, he contended, his client, AWB could attack conclusion (4) by way of reaction to Tradesmen’s contentions. I express no views as to the correctness of this; I am content to proceed on the suggested basis.
[5]These are set out at para [11] above.
I therefore turn to consider whether Tradesmen is correct in its contention that the notice required to be given under clause 15(ii) is a notice of appeal given in accordance with Rule 3.3 of the UNCITRAL Rules and must therefore comply with the requirements of that rule. Clause 15(i) requires disputes to be referred to arbitration under the UNCITRAL Rules. Article 3 of the UNCITRAL Rules provides for the commencement of the arbitration when the notice of arbitration is received. Article 3.3 sets out the formal requirements of such a notice.
The answer to this question ultimately depends upon the wording of clause 15(ii). Like the Centrocon clause, the claimant under this provision must do two things within the stipulated period; appoint an arbitrator and give a notice. The first of these was done within time. The difficulty arises from the notice requirement which appears to be expressed in alternatives. One or other of two things must be done within time: (1) a notice of arbitration must be given[6] or (2) an other claim alleging a dispute must be made in writing.
[6]The requirement that the Notice of Arbitration be “made in writing” is probably derived from the wording of the Centrocon clause which is set out above [5].
As to the first, I have little difficulty in accepting the conclusion of the Arbitral Tribunal that this is a reference to a notice under Article 3 of the UNCITRAL Rules.
The difficulty lies with the second. It cannot be a notice of arbitration because it is prefaced by the words “or” and “other.” It follows that this must be something different from a notice of arbitration. Otherwise there would be no work to be done by the words “or other claim alleging a dispute.” It is, therefore, open to a claimant to satisfy clause 15(ii) by making a claim in writing in a form which does not meet the requirements of the UNCITRAL Rules.
The consequence of this interpretation is as follows. When an arbitral dispute arises, it must be referred to arbitration[7] and arbitration must be commenced by the giving of a notice of arbitration.[8] But the claim, the subject of the dispute, will be barred[9] unless, within the stipulated period, the claimant has both appointed an arbitrator and also given a notice of arbitration or, if a notice has not been given, a claim in writing alleging the dispute has been given. In the latter event a notice of arbitration must be given at a later stage for the arbitration to commence.
[7]Clause 15(i).
[8]UNCITRAL Rules, rules 3.1 and 3.2.
[9]By cl. 15(ii).
The next question is whether the first notice given on 2 September 2004 is a sufficient notice of arbitration or claim. I agree with the Arbitral Tribunal that it is not a sufficient compliance with Article 3.3 to amount to a notice of arbitration. I also agree with the arbitrators to the extent that they concluded that the first notice incorporating, as it does, the letter of 26 February 2004, is a sufficient indication of the making of the claim foreshadowed in that letter. Upon the assumption that I make for present purposes, the claim is therefore not barred by clause 15(ii).
Conclusion
It follows from this that the application of AWB in proceeding No. 5253 of 2005 must fail. It would seem that, as a consequence, the application made by Tradesmen in proceeding No. 7161 of 2005 should be struck out. I will hear counsel further on the terms of the orders to be made and as to costs.
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