Cargill International SA v Peabody Australia Mining Ltd - [2010] NSWSC 887

No judgment structure available for this case.

Reported Decision:
78 NSWLR 533

New South Wales

Supreme Court

CITATION: Cargill International SA v Peabody Australia Mining Ltd [2010] NSWSC 887

HEARING DATE(S): 10 June 2010

JUDGMENT DATE :
11 August 2010

JURISDICTION: Equity
Commercial List

JUDGMENT OF: Ward J

DECISION: Plaintiff's application dismissed

CATCHWORDS: COMMERCIAL ARBITRATION - application under s 38(4)(b) of Commercial Arbitration Act 1984 (NSW) for leave to appeal from Arbitrator’s award on grounds of manifest error of law or strong evidence of error or in the alternative to remit questions of law to Arbitrator under article 34(2)(b)(ii) of Model Law - if former, whether leave to appeal should be granted under Commercial Arbitration Act - if latter whether denial of natural justice under the Model Law - HELD - Model Law applies - referral of dispute under rules of ICC did not operate as an ‘opt-out’ of Model Law under s 21 of the International Arbitration Act 1974 (Cth) – the decision in Eisenwerk Hensel Bayreuth Dipl-Ing Burkhardt GmbH v Australian Granites Ltd [2001] 1 Qd R 461 is plainly wrong and should not be followed - referral of dispute to ICC Rules did not indicate that parties intended to opt-out of Model Law to extent it applied as the curial law or lex arbitri - had Commercial Arbitration Act applied, threshold requirements for grant of leave not satisfied - discretion to grant leave would not have been exercised in any event - no denial of natural justice - plaintiff’s application dismissed - ADMIRALTY AND MARITIME JURISDICTION - whether dispute was one arising out of a maritime claim - HELD - dispute did arise out of a maritime claim so that exclusion agreement by adoption of article 28(6) of the ICC Rules would not apply

LEGISLATION CITED: Admiralty Act 1988 (Cth)
Commercial Arbitration Act 1984 (NSW)
International Arbitration Act 1974 (Cth)
International Arbitration Amendment Bill 1988 (Cth)
International Arbitration Amendment Act 2010, No 97 (Cth)

CASES CITED: Aerospatiale Holdings Australia Pty Ltd v Elspan International Ltd (1992) 28 NSWLR 321
Agricultural & Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570
American Diagnostica Inc v Gradipore Ltd (1988) 44 NSWLR 312
Appleton Papers Inc v Tomasetti Paper Pty Ltd (1983) 3 NSWLR 208
Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485
BCCI v Ali [2002] 1 AC 251
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Beveridge v Whitton [2001] NSWCA 6
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Carbotech-Australia Pty Ltd & anor v Yates & 14 ors [2008] NSWSC 540
Carcione Nominees Pty Ltd & Anor v Western Australian Planning Commission & Ors [2005] WASCA 56
Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26; (2003) 197 ALR 389;
Durayappah v Fernando (1967) 2 AC 337
Eisenwerk Hensel Bayreuth Dipl-Ing Burkhardt GmbH v Australian Granites Ltd [2001] 1 Qd R 461
Equuscorp v Glengallan [2004] HCA 55; (2004) 218 CLR 471
Export Credits Guarantee Department v Universal Oil Products Co [1983] 2 All ER 205; [1983] 1 WLR 399
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Gordion Runoff Limited v Westport Insurance Corporation [2010] NSWCA 57
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Kirk v Industrial Relations Commission of New South Wales [2010] HCA 1; (2010) 262 ALR 569
Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181
Mobil Oil Australia Pty. Ltd. v Federal Commissioner of Taxation [1963] HCA 41; (1963) 113 CLR 475
Natoli v Walker (1994) 217 ALR 201
Nishina Trading Co Ltd v Chiyoda Fire & Marine Insurance Co Ltd (The Mandarin Star) [1968] 1 WLR 1325; [1968] 3 All ER 712; [1968] 2 Lloyd's Rep 47
Pacific Carriers v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451
Port of Geelong Authority v The “Bass Reefer” (1992) 37 FCR 374
Promenade Investments Pty Ltd v State of New South Wales (1992) 26 NSWLR 203
Raguz v Sullivan [2000] NSWCA 240
Russell v Duke of Norfolk (1949) 1 All ER 109
Sharah v Healey [1982] 2 NSWLR 223
Shell International Petroleum Ltd v Gibbs [1983] 2 AC 375
Smith Ltd v H & S International [1991] 2 Lloyd’s Rep 127
Sunport Shipping Ltd v Tryg-Baltica International (UK) Ltd [2003] 1 Lloyd’s Rep 138
The “Catur Samudra” [2010] SGHC 18
The Kalliopi A [1988] 2 Lloyd’s Rep 101
The Radauti [1987] 2 Lloyd’s Rep 276
The Solon [2000] CLC 593
The Queen v Commonwealth Conciliation and Arbitration Commission: ex parte Angliss Group (1969) 122 CLR
The Zeus [1888] 13 PD 188
Toll v Alphapharm [2004] HCA 52; (2004) 219 CLR 165
Tradhol Internacional SA v Colony Sugar Mills Limited 2009 WL 3929893 (C.A.2(N.Y)) (20/11/09)
Trustees of Henry Smith’s Charity v AWADA Trading & Promotion Services (1983) 47 P&CR 607
Westcott v Hahn [1918] 1 KB 495
Westport Insurance Corporation v Gordion Runoff Ltd [2009] NSWSC 245

TEXTS CITED: Aronson, Dyer and Groves, Judicial Review of Administrative Action, 3rd ed, 2004
Barret-White S., and Kee C., “Enforcement of Arbitral Awards where the seat is Australia – how the Eisenwerk Decision might still be a sleeping assassin: (2007) 24(5) Journal of International Arbitration 515
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Davies S., “International Arbitration: when arbitral rules and procedural rules collide”, Australian Mining and Petroleum Law Association Yearbook, 2002
Chow P., “Issues in International Commercial Arbitration: Conflict between Model Law and Arbitral Rules” (2003) 19 BCL 426
Croft and Fairlie, “The New Framework for International Commercial Arbitration in Australia”, ACICA Conference, December 2009
Dicey, Morris and Collins, The Conflict of Laws, Sweet & Maxwell, 2006 and updating October 2009 edn
Gehle B., “The Eisenwerk decision is generally considered as bad law”, Vindobona Journal of International Commercial Law & Arbitration, 2009 13 VJ 251
Greenberg S., “ACICA’s New International Arbitration Rules” (2006) 23 (2) Journal of International Arbitration 189
Heydon, “Limits to the Powers of Ultimate Appellate Courts” (2006) 122 LQR 399
Lewison, The Interpretation of Contracts, 4th edn, Sweet & Maxwell, London, 2007
Megens P. and Cubitt C., “Arbitrators' perspective: the evolving face of international arbitration - the past, the present and the future”, International Arbitration Law Review, 2010, 13(1), 1-7
Mustill and Boyd, Commercial Arbitration, 2nd edn, Butterworths, 1989
Pryles M., “Exclusion of the Model Law” [2001] Int ALR 175
Submissions made to the Commonwealth Attorney General, in response to the Discussion Paper of 21 November 2008, by ICC Australia, ACICA, the Chartered Institute of Arbitrators, the NSW Bar Association, the Law Society of NSW, the Law Council of Australia, and the Victorian Bar

PARTIES: Cargill International SA (Plaintiff)
Peabody Australia Mining Ltd (Defendant)

FILE NUMBER(S): SC 2010/009966

COUNSEL: J Stevenson SC with D McLure (Plaintiff)
F Gleeson SC with K Day (Defendant)

SOLICITORS: Macpherson + Kelley Lawyers (Plaintiff)
Freehills (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL ARBITRATION LIST

WARD J

WEDNESDAY 11 AUGUST 2010

10/009966 CARGILL INTERNATIONAL SA V PEABODY AUSTRALIA MINING LTD

JUDGMENT

1 HER HONOUR: This application relates to a partial award made by Mr David Jackson QC, as arbitrator, on 7 December 2009 in a dispute arising out of a Standard Coal Trading Agreement made on 5 December 2005 between Cargill International SA and Peabody Australia Mining Limited (then known as Excel Coal Ltd) for the supply of coal to Cargill. (For convenience, I will adopt the same terminology as that used in the Arbitrator’s award and refer to the parties as Cargill and Excel, respectively.)

2 In the arbitration Excel claimed moneys outstanding in respect of certain coal deliveries made by it in 2009 at the end of the period covered by the agreement and Cargill counterclaimed for demurrage in respect of the late delivery to it of a number of shipments of coal earlier in the course of the agreement in mid 2007. Those disputes were referred to arbitration pursuant to the arbitration clause contained in the parties’ agreement (clause 18.9). It is conceded that the arbitration conducted by Mr Jackson was an international commercial arbitration for the purposes of the International Arbitration Act 1974 (Cth) (the Commonwealth Act).

3 The Arbitrator found in favour of Excel’s claim for USD299,822.74 (basically, for the amount of the short payment by Cargill in 2009) and dismissed the whole of Cargill’s counterclaim, having held that demurrage was not payable during the force majeure period (the duration of which had been one of the matters in dispute between the parties). In so doing, the Arbitrator found, relevantly, that:

(a) the period of force majeure had commenced at 0815hrs on 8 June 2007 and ran through to 0700hrs on 25 June 2007;

(b) the notice of intention to claim force majeure given by Excel to Cargill on 13 June 2007 satisfied the requirement in clause 17.2 of the agreement that such notice be given as early as practicable; and

4 There is no challenge to any of the Arbitrator’s findings summarised in (a) to (c) above (though Cargill does seek to challenge the conclusion that demurrage was not payable during the period of force majeure as so found). Rather, Cargill challenges the Arbitrator’s December 2009 award by reference to what is contended to be the Arbitrator’s failure to deal (or to deal correctly) with an alternative argument said to have been put by Cargill to the Arbitrator in relation to its demurrage claim.

5 That alternative argument, in essence, is that the period between the commencement of conditions amounting to force majeure (0815 on 8 June 2007) and the giving (at 1348 on 13 June 2007) of a force majeure notice, whether or not that notice had been given as early as practicable (and hence whether or not that notice was a valid and effective notice in compliance with clause 17.2 of the agreement), should have been accepted as counting as “laytime” under the agreement.

6 If that alternative argument were to be correct, then it seems not to be disputed that laytime would have continued to run from 0815 on 8 June 2007 and would have expired not long after that at 0956hrs on 8 June 2007. (On any view, this would mean, on the Arbitrator’s findings, that force majeure commenced before, albeit only very shortly before, the expiration of laytime.) Once laytime had expired, the Iron Bradyn would have been on demurrage (and once on demurrage all time lost, including time lost on account of force majeure, continues to count as demurrage).

7 Leaving aside for the present the import of Excel’s arguments (which were accepted by the Arbitrator) based on waiver/estoppel or the like, Cargill contends that, had the Arbitrator found that the vessel went on to demurrage as at 0956hrs on 8 June 2007, this would have meant that Cargill’s counterclaim for demurrage ran for the whole of the force majeure period from 8 to 25 June 2007.

8 In the present proceedings, Cargill seeks to challenge the Arbitrator’s award in one of two alternative ways, depending on the conclusion which is reached as to an initial jurisdictional question, that being whether the arbitration is governed by the Commercial Arbitration Act 1984 (NSW) (the State Act), as Cargill contends, or the UNCITRAL Model Law in accordance with s 16 of the Commonwealth Act, as Excel contends.

9 The first is under the State Act. Cargill seeks leave pursuant to s 38(4)(b) of the State Act to appeal from the award (which requires it to establish that the State Act applies and then to satisfy the threshold requirements of section 38, namely that there was an error of law that substantially affects the parties’ rights and either that there has been a manifest error of law on the face of the award or that there is both strong evidence of error and the question is one which is likely to add substantially to the certainty of commercial law).

10 Secondly, if (contrary to Cargill’s primary submission) the State Act does not apply, Cargill seeks an order setting aside the award under article 34(2)(b)(ii) of the Model Law, on the basis that the award is in conflict with the public policy of the State due to the failure of the arbitrator to address Cargill’s alternative argument (that failure, it is said, amounting to a denial of natural justice).

11 In its Amended Summons in these proceedings, Cargill sought not only leave to appeal but also, if successful in obtaining leave, a determination of the relevant questions of law upon the hearing of that appeal. However, before me it was conceded that it was not appropriate to entertain any appeal in the context of the present application, having regard to what was said by Allsop P (with whom Spigelman CJ and Macfarlan JA agreed) in Gordion Runoff Limited v Westport Insurance Corporation [2010] NSWCA 57, from [103]. Accordingly, the relief now claimed by Cargill (in the event that the State Act applies) is limited to the grant of leave to appeal.

12 I note that it is contended by Excel that, if the Model Law applies, then Article 34 of the Model Law provides the exclusive recourse against an arbitral award in the present case and that Cargill is thus precluded from applying for leave to appeal under s 38(4)(e) of the State Act because that provision is inconsistent with the more limited form of recourse against an arbitral award available under article 34 of the Model Law (and thus the State Act is, to the extent of the inconsistency, invalid by operation of s 109 of the Commonwealth Constitution). It was conceded by Mr Stevenson, though only for the purposes of this application, that if there were found not to have been an agreement between the parties to ‘opt out’ of the Model Law, then there would be a section 109 inconsistency between the two modes of review and that Cargill could proceed for a review of the Arbitrator’s decision only under the provisions of the Model Law.

13 Finally, in the event that the Model Law does apply, and Cargill succeeds on its application to set aside the award, then Cargill requests that the matter be remitted to the Arbitrator pursuant to article 34(4) of the Model Law for a determination by the Arbitrator of what I will refer to as the Alternative Argument.

Background Facts

14 The agreement (a standard form agreement developed by an entity known as globalCOAL and of which there have been successive versions since May 2001) was for the delivery, over the period from March 2006 to December 2008, of coal FOB (“free on board”) to three specified vessels at the port of Newcastle. (There was some dispute as to the extent to which the SCoTA form of agreement was used in the Australian coal industry in transactions for the sale of coal in and from Australia but it does not seem to be disputed that it is and can be used for the sale of seaborne thermal coal; and that it is so used in a percentage of trading contracts entered into in this country.) The version used by the parties in this case was version 5a (the standard terms of which incorporated all revisions effective as at 0630 GMT on 19 October 2005); however, there has been no subsequent change to the force majeure provisions in the current version of the agreement (hence any determination of a point of construction on the force majeure provisions of the earlier version has potentially wider relevance than for this case alone).

15 The coal deliveries were made by rail. Unfortunately, those deliveries which were due to take place in June 2007 were delayed due to disruption to the rail infrastructure in the Hunter Valley caused by severe storms in that month. The consequential delay in loading and departure of the three vessels in question gave rise to a claim for demurrage by Cargill. For the purposes of the present application, the particular dispute between the parties relates only to the claim for demurrage in respect of the delivery of coal to the MV Iron Braydn.

16 Cargill’s claim for demurrage in respect of the late delivery of coal due in June 2007 seems first to have been raised shortly after the coal was in fact delivered in July 2007. Excel relied upon the force majeure provisions of the agreement to deny the claim for demurrage. There was some correspondence between the two entities during the latter part of 2007 and early 2008 in relation to that claim.

17 The Arbitrator, in his award, referred to the communications between Excel and Cargill in relation to that claim from 2007 onwards and expressed the opinion that, as at November 2007, the only matter in issue between the parties in relation to the demurrage claim was whether it extended to the period beyond 21 June 2007.

18 Relevantly, the Arbitrator noted that, by February 2008 (when Cargill issued an invoice for an “undisputed amount” of demurrage, without prejudice to its claim for the balance, which was described as the “disputed amount”), there was no hint that Cargill was reserving to itself an entitlement to claim demurrage for the period extending back before 21 June 2007. The so-called “disputed amount” (in respect of which Cargill had reserved its position at that time) related to the claim for demurrage for the period from 21 to 25 June 2007. It represents the USD amount for which Excel was ultimately successful in the arbitration before the Arbitrator. However in relation to the “disputed amount”, the Arbitrator noted (at [7]) that the effect of the correspondence between the parties was that it was accepted that Excel was not liable for demurrage in the period from 8 June to 21 June 2007. (This becomes relevant when considering one of the threshold requirements for the grant of leave under the State Act, as the Arbitrator’s estoppel/waiver finding, which is not challenged, has the effect that Cargill is precluded from revisiting any claim for demurrage at least in the period prior to 21 June 2007.)

19 No further steps seem to have been taken by Cargill, whether in relation to the overall demurrage now claimed or for the “disputed amount”, until the term of the contract was coming to an end. At that point, when Cargill made payment in respect of the final invoice issued by Excel for the later (2009) coal deliveries it withheld an amount which included the “disputed amount” in respect of the 2007 coal deliveries. Excel then made a claim for short payment of that sum (USD299,882.47), after which Cargill served revised invoices claiming demurrage for the whole of the period from 8 to 25 June 2007. That claim was maintained by it by way of counterclaim in the arbitration (Excel being the moving party in the arbitral proceedings).

20 The Arbitrator noted that in the arbitration proceedings Cargill had put in issue every step which might lead to an entitlement on the part of Excel to rely on the force majeure provisions. The issues before the Arbitrator (which he observed were more numerous than would ordinarily be found in a commercial arbitration involving amounts of the kind there involved) included the time at which the force majeure event had occurred; whether notice of the force majeure event had been given as early as practicable, as required under the agreement; whether, under the agreement, as properly construed, demurrage was payable during a force majeure period; and whether Cargill was estopped or otherwise precluded from then asserting its claim for demurrage.

21 The issue which is the nub of the Alternative Argument (and which Cargill contends the Arbitrator failed properly to address) relates to the calculation of the period of laytime under the agreement and, in particular, whether (after commencement of force majeure) laytime continues to run up until the time at which a force majeure notice (valid or otherwise) is given. As Senior Counsel for Cargill, Mr Stevenson SC, accepted, the logical extension of this argument (if correct) is that unless a force majeure notice is given simultaneously with the commencement of a force majeure event, then laytime continues to run until such notice, valid or otherwise, is given. (By contrast, the effect of the Arbitrator’s determination is that if a valid force majeure notice is given in compliance with clause 17.1 of the agreement, then clause 17.3 means that a party does not become liable for demurrage during the period from the happening of the force majeure event the subject of that notice and that the giving of a notice of intention to claim force majeure under clause 17.2 as early as practicable in the circumstances means that time lost on account of force majeure does not count as laytime.)

22 The practical context in which this issue arose was as follows. As noted earlier, the coal was to be delivered on board the Iron Bradyn at the port of Newcastle. The procedure for the delivery and loading of coal involved the giving of a notice of readiness once the particular ship had arrived in port. There was then a period of ‘turntime’ (12 hours), following which ‘laytime’ commenced.

23 Laytime (defined in clause 1.1) is the time allowed under the agreement for the loading of the vessel at the delivery point, after which time demurrage (defined in clause 1.1 as the financial compensation payable if the time used in completing loading was longer than laytime) became payable. Under the agreement, laytime was to be calculated by reference to the nominated quantity of coal to be loaded on the vessel according to the formula set out in clause 7.5 (namely, the number of hours or part thereof calculated by dividing the tonnage of the shipment, expressed in metric tonnes, by the relevant “Cargo Handling Rate” expressed in Metric Tonnes per hour). (In that regard, I note that Cargill also asserts that the Arbitrator made an error of law in placing reliance, for the purposes of addressing the argument as to laytime, on the definition of Cargo Handling Rate including its reference to Weather Working Days, a matter I consider in due course.)

24 In respect of the coal to be delivered in June 2007 to the Iron Bradyn, the issue between the parties is now not as to the time of commencement of force majeure (although that was previously in issue); rather the question is whether, in the circumstances, laytime continued to run after the commencement of the force majeure period for the purposes of calculating when Excel became liable for demurrage.

25 It seems to be accepted that, but for the severity of the storms that occurred in early June 2007 and the consequential disruption to the rail infrastructure over most of that month, laytime (the period in which the Iron Bradyn was required to be loaded and after which demurrage would have been payable by Excel) would have ceased (and the Iron Bradyn would have gone on demurrage) at 0956hrs on 8 June 2007. It also seems to be accepted that, had the Iron Bradyn been on demurrage prior to the commencement of force majeure, the operation of force majeure would not have affected Excel’s liability for demurrage (it being broadly said that ‘once in demurrage, always in demurrage’, although there seem to be some exceptions (not material in the present case) to that principle, as identified by the Arbitrator at [170]).

26 Excel gave a notice of intention to claim force majeure of the kind contemplated by clause 17.2 at 1348hrs on 13 June 2007. (It had the day before given a notice of force majeure for the purposes of clause 17.1 and in that regard I note that the agreement contemplated two separate force majeure notices, only the second of which was in contention before the Arbitrator.) Whether the 13 June 2007 force majeure notice had been given as early as practicable for the purposes of clause 17.2 of the agreement was in issue before the Arbitrator, who ultimately found that it had. (Cargill had asserted that the failure to give a notice as early as practicable rendered it of no effect.)

27 As noted earlier, the Arbitrator ultimately found that Excel did not become liable for demurrage in respect of the Iron Bradyn until 25 June 2007 (after the cessation of the force majeure period).

28 Cargill’s principal submission in relation to the force majeure notice was that it was not valid or effective, as it had not been issued as early as practicable in the circumstances. It does not seek the challenge the Arbitrator’s finding in that regard. It relies now on the alternative submission it says it raised, namely that, even if the notice was not held to be invalid or ineffective, nevertheless the “delay” in its issue was to be taken into account when calculating whether laytime had expired and whether the vessel had gone on demurrage (as Cargill contended) on 8 June 2007. I consider in more detail below the content of the submissions put to the Arbitrator. For present purposes I simply note that Cargill’s complaint, in substance, is that the Arbitrator failed to deal at all (or dealt incorrectly) with the Alternative Argument identified now as being to the effect that (irrespective of whether the force majeure notice was a notice compliant with clause 17.2) laytime continued to run until a force majeure notice was given. (As I understand it, this argument requires acceptance of the proposition that a notice given as early as practicable in all the circumstances may nevertheless still be a notice the giving of which was the subject of delay for the purposes of clause 17.2.)

29 Senior Counsel for Excel, Mr Gleeson SC, submits that, to the extent that the Alternative Argument was put to the Arbitrator, it was rejected on the basis that the Arbitrator had concluded that notice was given as early as practicable (and hence, as I understand the submission, it was not necessary for the Arbitrator expressly to consider an argument predicated on a proposition antithetical to such a finding – namely, that there had been a delay in the giving of the notice) (as to which it says there was no manifest error of law) and, alternatively, to the extent that what Cargill is now seeking is to put an argument which was not in fact put (or put clearly) before the Arbitrator, there cannot be said to have been any denial of natural justice in the Arbitrator not having considered or expressly addressed the argument. It is submitted that Cargill was not deprived of a fair hearing of the case as put by it at the arbitration.

Issues

30 There are a number of jurisdictional and threshold issues which arise on the present application:

(ii) If the answer to (i) is yes, whether the dispute is one falling within the Admiralty jurisdiction of this Court (so as to override the effect of s 40 of the State Act, which precludes the grant of leave to appeal where there is an “exclusion agreement” under which the parties have waived recourse to the court in respect of their agreement).

(iii) If the answer to both (i) and (ii) is yes, whether the threshold requirements in s 38(5) of the State Act for the grant of leave to appeal are satisfied (namely that (a) the determination of the relevant questions of law could substantially affect the rights of one or more parties to the arbitration agreement; and (b) there is either a manifest error on the face of the partial award or there is strong evidence that the Arbitrator made an error of law and, if so, the determination of that question may add or be likely to add substantially to the certainty of commercial law).

(v) Whether, as a matter of discretion, the court should grant the relief sought (under the State Act or the Model Law, as the case may be) if Cargill has otherwise made out an entitlement to relief.

Summary

31 For the reasons set out below, I have concluded as follows on the above issues:

lex arbitri

Eisenwerk

Hensel Bayreuth Dipl-Ing Burkhardt GmbH v Australian Granites Ltd

Eisenwerk

Accordingly, I find that there was not an agreement between the parties in writing to opt out of the Model Law for the purposes of the Commonwealth Act and that the Model Law applies.

substantial effect on parties’ rights?

In light of the Arbitrator’s findings as to the existence of an enforceable agreement in 2008 in effect to compromise the claim for demurrage (or as to estoppel /waiver) it seems to me that the determination of the relevant questions of law (assuming Cargill’s contentions on those questions were to be accepted) could at most permit Cargill to claim demurrage for the short period from 21-25 June 2007 and therefore would have a lesser impact financially than Cargill has contended.

and this finding is not challenged

Therefore, I would have been prepared to accept that a determination of the Alternative Argument was one which could have had a substantial effect on the rights of Cargill (albeit a lesser financial effect than that for which Cargill is contending). (The determination of the weather working day issue is not, however, one which of itself would be likely to have had a substantial effect on the parties’ rights, as conceded by Mr Stevenson, and it alone would not have a substantial effect on the parties’ rights.)

manifest error?

As to the alleged error the subject of the first ground of appeal, namely the construction of clause 7.11.2 in relation to the running of laytime until any notice of the kind contemplated in clause 17.2 is given, I am not satisfied that there has been shown to be a manifest error on the face of the partial award. I consider that the Arbitrator’s construction in this regard was one which was reasonably arguable. Any error of construction that might have been made in this regard (and I am by no means suggesting that there was one) is not so obvious as to satisfy the test of manifest error.

As to the alleged error the subject of the second ground of appeal, namely the working weather days argument, again I am not satisfied that there has been shown to be a manifest error on the face of the partial award. To the extent that the Arbitrator construed clause 7.11.2 by reference to the definition of ‘Weather Working Days’ in the definition of Cargo Handling Rate again I think such a construction was reasonably arguable. Although the purpose of the definition of Cargo Handling Rate, on its face, was to enable the calculation of the period of laytime to be allowed for the purposes of a shipment, as opposed to the question whether the period of laytime so calculated was to be suspended by reason of weather conditions or force majeure in any particular case, I think the possibility that the definition could be construed as having the operation for which Excel contended is not so unarguable as to make its adoption by the Arbitrator a matter in which he made a manifest error of law.

Strong evidence of error/certainty of commercial law?

As to the second alleged error, given that the Arbitrator seems to have had regard, as an aid to construction, to the parties’ post contractual conduct and that this may have affected the weight placed by him on the other matter which led to his finding that the weather working day definition had a substantive negative operation (and was not merely an integer in the definition of Cargo Handling Rate), I am of the view that although there was not a manifest error of law in relation to the construction of clause 7.11.2 by reference to the concept of weather working days, there is strong evidence of an error of law in this regard. For the same reason as indicated above, I would have found that the determination of this question was one that might add or be likely to add substantially to the certainty of the law in this area.

Given the findings summarised above, even had I found for Cargill on the initial jurisdictional question, I would not have found that it had established an entitlement to relief. I would not have been satisfied that the threshold requirements for the grant of leave to appeal under the State Act had been satisfied. (In relation to the second ground of appeal where I consider there was strong evidence of an error of law, the determination of which might add or be likely to add substantially to the certainty of the law in this area, the determination of that question alone – ie, not coupled with the determination of the Alternative Argument - would not have been likely to substantially to affect Cargill’s rights).

(iv) I am not satisfied that there has been a denial of natural justice. I am of the view that the Arbitrator considered and dealt with the submissions as made to him in relation to the construction and operation of clause 7.11.2. I think there is some force in the suggestion by Excel that what is now sought to be put by Cargill is a modification or reformulation of the alternative submission that was in fact put before the Arbitrator. If so, he cannot be criticised for having not dealt with it. However, even if it can be said that there has been no modification or reformulation as such, I consider that the Arbitrator’s findings are consistent with a conclusion that there is no operative delay for the purposes of clause 7.11.2 in circumstances where there was a force majeure notice issued as early as practicable. The Arbitrator raised the issue as to the effect of a notice not given timeously, during the course of debate with Senior Counsel then appearing for Cargill on the arbitration. He was clearly appraised of the submission that even if the notice was effective, and had been given as early as practicable, there might be a continuation of laytime for the purposes of Cargill’s claim for demurrage (and he seems to have dealt with this submission, implicitly, by rejecting the premise that there could be such a notice which nevertheless amounted to delay for the purposes of clause 7.11.2). The Arbitrator appears to have addressed the thrust of the Alternative Argument put to him in his Partial Award, even if he did not frame his reasons in the way in which the argument is now put. Cargill cannot in my view be said to have been deprived of a fair hearing in that regard.

Reasons

32 I have outlined above the factual background to the present dispute. In summary, if the Model Law does not apply then the relevant questions are whether Cargill has satisfied the threshold requirements for the grant of leave to appeal under the State Act and whether, as a matter of discretion, leave should be granted; if the Model Law does apply then the question is as to whether there has been a denial of natural justice. I consider the issues for determination below.

(i) Is there an opt out agreement?

33 The UNCITRAL Model Law has the force of law pursuant to s 16 of the Commonwealth Act and appears as schedule 2 to that Act. Section 21 of the Commonwealth Act provides that:

is to be settled otherwise than in accordance with the Model Law

Is it necessary that the opt-out agreement be express?

34 Section 21 requires that, to exclude the Model Law, there must be an agreement in writing but says nothing as to whether that agreement must be express or can be implied from the terms of the parties’ written agreement.

35 Mr Gleeson placed emphasis on the fact that (as made clear in the Explanatory Memorandum to the International Arbitration Amendment Bill 1988 (Cth)) s 21 is an ‘opt out’ provision. The notes to Clause 7 of the Bill (relating to the then new s 21) stated that:

unless the parties expressly exclude it

36 Mr Gleeson submits that what the adoption of an opt out procedure makes clear is that the parties must turn their minds to the issue and do something (in writing) expressly to exclude the Model Law and that, in the absence of an express exclusion, they should not be taken impliedly to have done so. It seems to me that it by no means follows that an implied agreement to exclude the Model Law could not be the result of the parties having turned their minds to the question of the law which should govern their arbitration and adopted a different law. The adoption, if that be the case in any particular agreement, of a different curial law suggests that the parties have indeed turned their minds to the question of what law should govern their arbitration. The fact that they may have provided for this in an indirect way, by way of adoption of a particular system of law as the lex arbitri, rather than by the direct exclusion of the lex arbitri which would otherwise apply does not seem to me to be any the less effective a means of indicating their intention in that regard. Apart from the brief reference in the outline to the Explanatory Memorandum (not reiterated in the specific notes to the relevant clause) to an express exclusion of the Model Law, there is nothing in that Memorandum or in the terms of s 21 itself to preclude the operation of an implied agreement as a means of exclusion of the Model Law, provided that that implied agreement can be discerned from the terms of a written agreement between the parties.

37 The implication of an agreement to exclude the Model Law must surely arise if the parties in their written arbitration agreement (or any other document in writing) have chosen a wholly inconsistent system of law to govern their arbitration. In those circumstances, I am not persuaded that (had they done so in this case) this would not have been sufficient to enliven the operation of s 21. I do not read s 21 as requiring that the agreement to ‘opt out’ be in express terms, as opposed to an agreement which can be inferred from a written agreement. (To the extent that Eisenwerk, to which I refer below, is authority for the proposition that the relevant opt out agreement can be one which is an implied agreement, then I would not conclude that it was plainly wrong. Where I differ from the conclusion reached in Eisenwerk is as to whether the choice of procedural rules to govern an arbitration amounts to an implied exclusion of the lex arbitri.)

38 Was there an implied agreement between the parties in this case to settle any disputes otherwise than in accordance with the Model Law?

39 Clause 18.9 of the agreement provided as follows:

shall be referred to International Arbitration under the Rules of Arbitration of the International Chamber of Commerce

40 The agreement to refer disputes for arbitration under the ICC Rules, though with the modification that only a single arbitrator was to be appointed in this case, was confirmed (after the particular disputes had arisen) in an exchange of correspondence between their respective lawyers on 15 April 2009 (Cargill’s solicitor having earlier suggested that an ICC arbitration was not necessary and that the arbitration, by default, would be governed by the Commonwealth Act (as well as the State Act) and the Model Law – see p 138 vol 4 Ex A).

41 The question arises, therefore, as to whether the parties’ agreement to “refer” the dispute for arbitration “under” the ICC Rules (terminology which in my view may well connote something other than what would be comprised by an agreement for “settlement” of the dispute “in accordance with” any particular system of law) constitutes an implied agreement to opt out of the Model Law for the purposes of the Commonwealth Act. (It seems to me that there is a not immaterial difference in this context between the respective clauses in Eisenwerk and in the present contract, in that the reference to referral of the dispute for arbitration under the ICC Rules more clearly draws attention to the procedural aspects or rules governing the arbitration rather than the ultimate resolution or determination of the dispute.)

Eisenwerk

42 Not surprisingly, Mr Stevenson relies (in support of his submission that the parties’ agreement to adopt the ICC Rules constitutes an implied agreement to opt out of the Model Law for the purposes of the Commonwealth Act), on the decision of the Queensland Court of Appeal in Eisenwerk, a case determined in 1999. There, the parties’ arbitration agreement included a provision in similar (though not relevantly identical) terms to that contained in the arbitration agreement in the present case before me, that clause being as follows:

43 In Eisenwerk, the question whether the parties had, by including the above clause, “opted-out” of the Model Law for the purposes of s 21 of the Commonwealth Act arose on an appeal from the refusal by Fryberg J to grant a stay, under s 7(2) of the Commonwealth Act, of court proceedings brought by the respondent to the appeal and his Honour’s decision to restrain the appellant from pursuing an ICC arbitration. Pincus JA (with whom Thomas JA and Sheperdson J agreed) took judicial notice of the existence and content of the ICC Rules and construed the parties’ agreement for any dispute to be ‘finally settled in accordance with ICC Rules’ as an agreement that the dispute would be settled otherwise than in accordance with the Model Law. His Honour thus held that the Model Law did not apply. Pincus JA said at [11]-[12]:

Law and Practice of International Commercial

If Australian Granites’ argument is right, use of this recommended clause is insufficient to avoid the, surely highly inconvenient, result that the parties are bound to both a Model Law arbitration and an ICC arbitration . And the former would not be an arbitration under the aegis of an established international organisation, as the latter is; it should be noted that the Model Law has not been widely adopted. Only 19 countries had adopted it, to the month of February 1998, and those countries did not include Germany: see A. Shields, “The development of a uniform framework for international arbitration” (1998) 16 The Arbitrator 217 at 224.

In my opinion the better view is that, by expressly opting for one well-known form of arbitration, the parties sufficiently showed an intention not to adopt or be bound by any quite different system of arbitration, such as the Model Law.

44 Eisenwerk has since been followed by the Supreme Court of Singapore in John Holland Pty Ltd aka John Holland Construction & Engineering Pty Ltd v Toyo Engineering Corp (Japan) [2001] 2 SLR 262.

45 Eisenwerk stands as authority for the proposition that, by expressly adopting a different ‘form of arbitration’ (there, that being the ICC Rules), parties will be taken to have shown a sufficient intention not to adopt the form or system of arbitration provided for under the Model Law (and that this is sufficient to amount to an opt-out agreement for the purposes of the Commonwealth Act).

46 What the Court of Appeal in Eisenwerk did not appear expressly to address was the question whether, by providing for their disputes to be settled by arbitration in accordance with the ICC Rules, the parties had done any more than to adopt a particular set of arbitral rules, rather than the lex arbitri or curial law as the law governing any such arbitration.

47 It is the conceptual distinction between the lex arbitri and the procedural rules of an arbitration on which Mr Gleeson bases his primary submission that the decision in Eisenwerk is plainly wrong and should not be followed by this Court. Mr Gleeson submits that where the Queensland Court of Appeal erred in Eisenwerk was that it was not taken to, or failed to appreciate, the critical distinction between the lex arbitri or curial law governing an arbitration (which, if the seat of arbitration is within Australia is likely, unless excluded by the parties, to be the Model Law) and the procedural rules of the arbitration (which may be chosen by the parties themselves as a matter of contract to govern the operation of the arbitration itself). (The Queensland Court of Appeal does appear, however, to have been taken in argument to the fact that the provisions of the Model Law were capable of being varied by agreement between the parties and that the ICC Rules were capable of applying as a partial modification of the Model Law, leaving untouched other provisions of the Model Law such as the recognition and enforcement provisions – at least so far as reference is made to the summary report, appearing in the published reasons, of Counsel’s submissions on that appeal.)

Deference to be accorded to Eisenwerk decision

48 The need for me to be convinced (in order to accept Mr Gleeson’s submission that Eisenwerk should not be followed) that the conclusion reached in Eisenwerk is plainly wrong arises from the deference that I am bound, as a first instance judge, to accord to decisions of intermediate appellate courts and, here, to the interpretation there placed on s 21 of the Commonwealth Act by the Queensland Court of Appeal and its application having regard to the clause there being considered. The High Court in Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485, at 492, has said that:

49 To similar effect was the statement in Beveridge v Whitton [2001] NSWCA 6, by Heydon JA (as his Honour then was), with whom Mason P and Powell JA agreed, applying that approach also to well-considered dicta of intermediate appellate courts, at [30].

50 In Gett v Tabet (2009) 254 ALR 504; [2009] NSWCA 76, the Court of Appeal considered (at [274]-[293]) the meaning of the phrase “plainly wrong”, in the context of the question as to when an intermediate appellate court ought to depart from its own decisions in relation to a matter of common law. At [283], the Court (comprised of Allsop P, Beazley and Basten JJA) noted that the adverbs “plainly” and “clearly” in the context “bespeak the quality of the error or the level of conviction of error that must be perceived” (and do not limit the circumstances of departure from previous authority to those in which the error is patent or obvious or easily perceived). Their Honours concluded (at [294] – [295]):

plainly wrong

clearly wrong

Chamberlain

Clutha

51 At [301], their Honours said:

Queensland v Commonwealth

John

RJE

52 The position stated in Marlborough was reiterated in Farah Constructions Pty Limited v Say-Dee Pty Limited [2007] HCA 22; (2007) 230 CLR 89 (where the High Court also emphasised the need for regard to be had to “long-established authority and seriously considered dicta of a majority of this Court”, at [134]). (In CAL No 14 Pty Limited v Motor Accidents Insurance Board [2009] HCA 47; (2009) 239 CLR 269, at [50], the High Court rejected the suggestion that Farah had altered the doctrine of precedent (in a different regard) by expanding the principle in Marlborough to the common law generally (the application of the relevant principle to the common law being well-established).)

53 In Justice Heydon’s article “Limits to the Powers of Ultimate Appellate Courts” (2006) 122 LQR 399, at 415 n 114), when considering the factors which may affect the weight to be attributed by an ultimate appellate court to its own dicta, Justice Heydon referred, among other things, to various circumstances in which that dicta may have fallen from the court otherwise than in the course of considered argument on the point. By analogy, the weight to be accorded to the conclusion in Eisenwerk may potentially be affected by the fact that it does not appear from the court’s reasoning that attention was drawn to the distinction between the lex arbitri and the procedural rules of an arbitration, as such.

Other authorities

54 In his submissions, Mr Stevenson noted that there has been no demur by other courts to the reasoning in Eisenwerk (though having been cited on seven or eight occasions on other points); that there is no judicial expression of opinion that it is wrong; and that there is no example of any court in Queensland or any other State refusing to follow it. Nevertheless, I was not taken to any authority in which the question as to whether Eisenwerk should be followed in this respect had been expressly argued before the court and hence had been the subject of considered review.

55 In addition to the absence of express authority overturning or rejecting Eisenwerk, Mr Stevenson pointed to the decision of Cole J in Aerospatiale Holdings Australia Pty Ltd v Elspan International Ltd (1992) 28 NSWLR 321. There, his Honour (at 325) considered an arbitration clause which referred disputes to arbitration “by a single arbitrator appointed at the request of either party by the President for the time being of the Institution of Engineers of Australia in accordance with the Commercial Arbitration Act 1984 (NSW)”. His Honour held that, by referring to the State Act, the parties had agreed that the Model Law was not to apply for the purposes of s 21 of the Commonwealth Act.

56 Relevantly, Mr Stevenson submitted that, to the extent that his Honour was of the view that a specific reference to a different set of arbitration procedures to the Model Law involved exclusion of it, this decision supports the result in Eisenwerk. However, in Elspan, the reference was to an arbitration under the State Act itself (and therefore can be seen as a choice of the lex arbitri, not an adoption of a particular set of procedural rules as such) and it seems to me to be distinguishable from Eisenwerk in this regard.

57 Similarly, although reference was made by Mr Stevenson to the decision of Giles CJ Comm D (as his Honour then was) in American DiagnosticaInc v Gradipore Ltd (1988) 44 NSWLR 312, there again the relevant choice was of the State Act (albeit in conjunction with the UNCITRAL Arbitration Rules). There, Giles CJ found (at 323) that an agreement to use the UNCITRAL Arbitration Rules for an arbitration in conjunction with the “Arbitration Act current in New South Wales, Australia” was a sufficient agreement for the purposes of s 21 of the Commonwealth Act to opt out of the UNCITRAL Model Law. Again, this decision is distinguishable by reference to the particular wording of the clause in question. I agree with the submission by Mr Gleeson that American Diagnostica and Elspan (neither of which expressly referred to or applied Eisenwerk) do not support the reasoning in Eisenwerk as in both cases what the parties expressly chose was the State Act (as the lex arbitri). I also note that in American Diagnostica (at 324), his Honour recognised that the lex arbitri, as the law governing the conduct of the arbitration, went beyond matters of procedure, saying that:

Is reasoning of Eisenwerk plainly wrong?

58 Is the conclusion reached in Eisenwerk plainly wrong, such that it would be open for me to find that the adoption by the parties of the ICC Rules did not necessarily amount to an agreement to opt out of the Model Law (assuming for this purpose, though I think that such an assumption is doubtful, that the respective arbitration clauses can be said to be relevantly indistinguishable)?

59 Mr Gleeson’s principal contention, as noted earlier, is that the adoption of arbitral rules by the parties does not of itself constitute an opting out of the Model Law for the purposes of s 21 of the Commonwealth Act and that in this regard the decision in Eisenwerk is plainly wrong and should not be followed.

60 What was the reasoning underlying the conclusion in Eisenwerk? Although reference was made by Pincus JA, first, to the perceived high level of inconvenience which would follow from a result that the parties are bound to both a Model Law arbitration and to an ICC arbitration; secondly to the fact that the former would not be an arbitration under the aegis of an established international organization, as the latter would be; and, thirdly, to the fact that the Model Law had not then been widely adopted, the basis for the conclusion that there had been an implied opting out of the Model Law was the perceived inconsistency and irreconcilability as between the provisions of the Model Law and those of the ICC Rules. In that regard, as noted above, had the provisions in fact been wholly irreconcilable and had the systems in question performed the same function in relation to an arbitration, then I would accept the logic on which the Court of Appeal proceeded. However, for the reasons set out below that does not appear to be the case.

61 Turning first to what I might describe as the peripheral or background matters raised (as to inconvenience and the like), it seems to me that the perceived inconvenience of there being two sets of rules is overstated in that many of the arbitral rules provided for under the Model Law are rules which apply in default of any choice to the contrary by the parties. Therefore, as submitted by Mr Gleeson, there is no reason why the two systems could not operate together (and, I might add, any inconvenience in reconciling which of any two potentially applicable rules was intended to apply, apart from being something of the parties’ own making, would thus be readily able to be resolved by ignoring all default rules which covered a matter dealt with in the ICC Rules). As to the second matter, it is not suggested how the question whether an arbitration would or would not be under the aegis of an established international organization is relevant in pointing to the intention of the parties whether or not to opt a form of arbitration not under the aegis of any such organization. Thirdly, apart from the question of how this would be relevant in any event, the breadth of acceptance worldwide of the Model Law is now very different from that which was the case in 1999. (Mr Gleeson noted that, to the extent that it is relevant, more than 60 countries have now adopted the Model Law, referring to statistics available from the UNCITRAL website.)

62 Mr Gleeson, recognising the high test that must be met in order to come to such a conclusion, put forward a series of propositions as to why Eisenwerk should be held to have been wrongly decided, each in essence turning on the distinction between the lex arbitri governing an arbitration and the procedural rules applicable to an arbitration. In summary, those propositions were that the Court of Appeal in Eisenwerk had:

(i) (this being the fundamental focus of the criticism of this decision) failed to appreciate and apply the distinction between the lex arbitri or curial law governing the conduct of the arbitration (being the legislative framework in which the arbitration takes place, here the Model Law unless excluded) and the procedural rules applicable to an arbitration by agreement between the parties (here, the ICC Rules);

(ii) failed to appreciate that the ‘opt out’ provision in s 21 of the Commonwealth Act allows the parties to substitute an alternate law under which their dispute will be resolved and is not concerned with the parties’ choice of procedural rules;

(iii) failed to appreciate that the Model Law is a form of lex arbitri , not a different system of arbitration procedure from that comprised by the ICC Rules and hence the Model Law provisions can logically apply to arbitrations administered by a variety of permanent arbitral institutions, such as the ICC (Mr Gleeson referring there to Articles 2(a), (d) and (e) of the Model Law);

(iv) failed to take into account that the Model Law contains provisions which allow parties a wide degree of autonomy or control over how their dispute is to be resolved (referring, in particular, to Article 19 of the Model Law, the importance of which has been stressed in other contexts as noted below) including the right (under Article 2(d) of the Model Law) to authorise a third party (which would include an institution such as the ICC) to determine the procedure to be followed and contemplates that the parties may include in their arbitration agreement matters as to arbitration rules (institutional or otherwise) (there referring to Article 2(e) of the Model Law), this autonomy being subject only to the mandatory provisions of the Model Law concerning the conduct of the proceedings or the making of an award (referring to Article 18);

(v) incorrectly assumed that the Model Law and the procedural rules as chosen by the parties (or as determined by the arbitrator) cannot operate in conjunction with each other (the contrary position being contemplated by Article 19, which allows the parties to determine the rules of procedure to govern their arbitration); (in support of which proposition Mr Gleeson referred to the Report of the Secretary General, UNCITRAL Secretariat, Analytical Commentary on draft text of a Model Law on International Commercial Arbitration , presented to the United National Commission of International Trade Law, 18 ^th Session, Vienna, 3-21 June 1985, at 44-45 which identified Article 19 as the most important provision of the Model Law in that the parties are thereby given a choice as to the procedures to be adopted for their arbitration);

(vi) incorrectly suggested that the provisions of the Model Law and the ICC Rules are inconsistent and that such inconsistency is irreconcilable (in particular, Mr Gleeson noted that the example given by Pincus JA as to the differences in respect of provisions concerning the number and identity of arbitrators under the Model Law and ICC Rules (comparing Article 10 of the Model Law and s 18 of the Commonwealth Act and Articles 1 and 8 of the ICC Rules) did not support the conclusion that there was any inconsistency in light of the fact that Articles 10(1) and 11(2) of the Model Law provide that the parties are free to determine the number of arbitrators and to agree upon a procedure of appointing the arbitrator or arbitrators); and

lex arbitri

63 As noted by Mr Gleeson, insofar as the Model Law deals with procedural matters, the provisions in the Model Law generally apply by way of default or fall back provisions in the absence of specific agreement by the parties or where the procedural rules selected are unable to apply for some reason (referring by way of example to the wording “unless otherwise agreed by the parties” used in Articles 3, 11(1), 17, 24, 26 and 29) or the statement that “the parties are free to agree” on certain matters in Articles 10, 11(2), 13, 19, 20, and 22). This illustrates the autonomy given to parties under the Model Law and the ability to reconcile the two sources of potential rules applicable to an arbitration conducted under the Model Law as the lex arbitri but adopting procedural rules from another source.

64 Apart from the express recognition in the Model Law that the parties may choose the procedural rules of a particular institution (Articles 2(a) and (d) of the Model Law) and hence contemplates that another institution may have a procedural role to play in the conduct of the arbitration, the Model Law reserves to the court the power to intervene where an institution fails to perform its procedural function and thus contemplates that the Model Law may have a supervisory or supplementary role over and above the role accorded to other institutions by reason of the parties’ contractual choice of rules. In this regard, Mr Gleeson referred to the procedure for the appointment of arbitrators outlined in Article 11(4)(c) of the Model Law.

65 As the parties’ freedom to choose the procedural rules governing the arbitration is expressed by Article 19 to be subject to any mandatory provisions of the Model Law, Mr Gleeson submitted that the parties’ choice of procedural rules cannot of itself constitute ‘opting out’ of the Model Law for the purposes of s 21 of the Commonwealth Act and that the choice of procedural rules does not involve the parties selecting any alternate law (such as the lex arbitri) under which their dispute will be resolved.

66 It seems to me that the critical distinction is as to whether the opt out provision contemplated by s 21 is one which focusses on the adoption of the Model Law as the lex arbitri or simply as the source of the procedural rules for the arbitration. In its terms, clause 18.9 of the arbitration agreement in the present case expressly focusses on the adoption of particular procedural rules (by reference to the ICC Rules, those being of a procedural nature). That does not necessarily involve any adoption of a different system of law as the lex arbitri (which, as explained in Dicey, Morris and Collins, The Conflict of Laws, Sweet & Maxwell, 2006, at [16-035], is the law chosen by the parties to govern arbitral procedure that is, the procedural law of arbitration (at [16-039]) from that which would apply under the Model Law, nor is it inconsistent with the application of the Model Law as the lex arbitri. (This is also referred to as the ‘curial law’ of the arbitration (see Mustill and Boyd, Commercial Arbitration, 2^nd edn, Butterworths, 1989, at 64). Ordinarily, the lex arbitri is that of the seat of the arbitration for the reasons noted in Raguz v Sullivan [2000] NSWCA 240, where Spigelman CJ and Mason P (with whom Priestley JA agreed) said at [93]:

James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd

Black Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AG

Bank Mellat v Helliniki Techniki SA

67 Recently, Dicey and Morris in their updating companion (October 2009) to the 2006 edition, have stated (affirming the position that parties can choose procedural rules different to the seat of the arbitration) (at [16-034]) that:

Difference between the lex arbitri and procedural rules of the arbitration

68 In the private international law context, there are a number of laws which may govern different aspects of or relating to an arbitration. Those may be summarised as being the proper law governing the substantive rights of the parties in respect of their underlying dispute (here the proper law of the contract), the proper law of the arbitration agreement (which may differ from the proper law of the contract itself) which governs the obligation of the parties to submit their disputes to arbitration and to comply with any arbitral award made in the context of that arbitration, and the lex arbitri or curial law governing the conduct of the arbitration of any particular dispute referred to in accordance with the arbitration agreement (to which I have referred above). (See Mustill and Boyd, Commercial Arbitration, at 61-62)

69 As explained by Dicey and Morris (at [16-035]) the lex arbitri is the law chosen by the parties to govern arbitral procedure that is, the procedural law of arbitration (at [16-039]). The extent to which the parties may choose the lex arbitri (or the extent to which such a choice may be given recognition by the law applicable at the seat of the arbitration) will be determined in much the same way as in other contexts the courts determine when to recognise and give effect to a choice by the parties of the proper law of their contract. However, the lex arbitri is recognised as being distinct from the proper law of the contract (Smith Ltd v H & S International [1991] 2 Lloyd’s Rep 127, at 129-130; American Diagnostica, at 324-328; Blackaby N., Partasides C., Redfern A., and Hunter M., Redfern and Hunter on International Arbitration, 5^th edn, Oxford University Press, 2009, at 3.39-3.43). It is also to be distinguished from the procedural rules by which, in accordance with the lex arbitri, the parties may agree that the arbitration will be conducted.

70 Giles CJ in Comm D in American Diagnostica, referred to the lex arbitri as the law governing the conduct of the arbitration (at 324), and explained that the scope of the lex arbitri (or curial law of the arbitration) goes beyond matters of procedure:

71 The learned authors go on to say, at 62;

72 Dicey and Morris note (in a passage substantially in the same form from the 1987 edn which was approved by Giles CJ in American Diagnostica, at 325) that the choice of the seat of arbitration is in effect the choice of the lex arbitri to govern the arbitration but that there remains the potential, after choice of the lex arbitri for parties to choose a different set of procedural rules governing the arbitration to those of the seat, save for the mandatory rules that will still apply according to the relevant law of the seat, (at [16-035]);

Party autonomy in the choice of the law to govern arbitral procedure (the lex arbitri) is expressed in the choice of a seat for the arbitration. This “seat” is in most cases sufficiently indicated by the country chosen as the place of the arbitration. For such a choice of place not to be given effect as a choice of seat, there will need to be clear evidence that the parties (or the arbitrators, if so authorised by the arties) agreed to choose another seat for the arbitration; and that such a choice will be effective to endow the courts of that country with jurisdiction to supervise and support the arbitration. The concept of the “seat” of the arbitration is a juridical concept. The legal “seat” must not be confused with the geographically convenient place chosen to conduct particular hearings (there citing Naviera Amazonica)

lex arbitri

73 The dual source of procedural rules in the context of arbitration is referred to by Dicey and Morris (at [16-030]) as follows:

The dual character of procedural law in arbitration is reflected in the dual source of procedural rules. All of the major international arbitral institutions have their own procedural rules, which will apply to arbitrations conducted under their auspices (save to the extent that the parties expressly provide otherwise). From the perspective of the parties to an international arbitration (and of the arbitral institution) these rules will form the primary procedural code. Even where the parties have chosen ad hoc rather than institutional arbitration, the parties may select a set of procedural rules such as the UNCITRAL Arbitration Rules.

lex arbitri

directory:

mandatory:

supportive;

205 The Arbitrator noted Excel’s contention in that regard as being that the approach reflected in Cargill’s earlier acceptance (that time did not count against Laytime from 7 June 2007 because of bad weather) could also justify a conclusion that Laytime did not run from at least the time from which Excel relied on force majeure.

206 “Cargo Handling Rate” was defined in clause 1.1 to mean the rate, as specified in the relevant specification schedule at which the coal was to be discharged at the Delivery Point “for the purposes of calculating Laytime”. The relevant specification schedule stated that the minimum shipment size was to be 15,000 Metric Tonnes and that “the Seller shall load shipment aboard the Vessel at the following average rates per WWD being a day of twenty-four (24) consecutive hours SHINC” (Sundays and holidays included).

207 The Arbitrator noted in his award that, prima facie, the reference to WWD (Weather Working Day) appeared to be an integer in the calculation of a Cargo Handling Rate but he ultimately accepted the contention of Excel that it had a substantive negative operation in that any obligation to load, and the counting of laytime, was suspended during the period when the loading was hindered by bad weather.

208 In coming to a view on this question (which the Arbitrator noted was a difficult issue because in his view the agreement was not very clear in this respect), the Arbitrator expressly had regard, first, to the description of Cargo Handling Rate in the Schedule (which he considered was something more than simply part of a definition - perhaps because it expressed an obligation for the Seller to load the shipment at the specified average rates) and, secondly, to the conduct of the parties “before Cargill sought to resile from its earlier position” (ie their conduct before Cargill reinstated its claim to demurrage for the whole of the period) which he considered suggested that the parties understood that the agreement had the meaning for which Excel contended.

209 Mr Gleeson conceded that the second reason given by the Arbitrator was not strictly a matter referable to interpretation of the contract. Nevertheless, it was said that this was simply a recognition that the parties had acted in a particular way, the Arbitrator having observed that this was a belated submission and seemed to be a response to Excel taking the matter to arbitration. On that aspect, I have difficulty accepting that the Arbitrator’s view of the parties’ post-contractual conduct was no more than a recognition that the parties had acted in a particular fashion and not a factor which had (in conjunction with the other matter to which reference was made) led the Arbitrator to view the operation of the Cargo Handling Rate definition in the way he did. The Arbitrator explicitly made reference to this as the second of the reasons he had for coming to that view of the definition (para 163) and treated it almost as an admission by conduct (though explaining it in terms of an indication of the parties’ understanding of the operation of the clause). In that regard, it seems to me that to the extent that the Arbitrator had regard to post-contractual conduct in construing the definition there was strong evidence of an error of law in so doing.

210 What is not clear is that but for this error the Arbitrator would not still have come to the same conclusion based on the first matter to which he said he had had regard. (Although expressed as one of the two matters to which he had regard, this part of the Arbitrator’s reasoning seems to read as if the Arbitrator was drawing some comfort (from the post-contractual conduct) for the conclusion he was proposing to draw on the wording of the definition itself.)

211 If the Arbitrator’s conclusion could have been sustained by reference to the first reason set out above, then the fact that one part of the Arbitrator’s reasoning could not be sustained might not be to the point. However, it is not clear from the award whether the first reason advanced for treating the definition as having negative operation would have been sufficient, in the Arbitrator’s eyes, to stand alone and, in any event, this does not address the issue as to whether the definition could objectively be said to be intended to have any substantive operation in relation to laytime at all.

212 It is submitted by Mr Gleeson that the finding as to the Weather Working Days issue (though apparently conceding that reliance on post contractual conduct would not strictly be correct) was not a manifest error because the approach which the Arbitrator took to the matter was reasonably arguable. Mr Gleeson pointed to the outline given by the Arbitrator of the circumstances in which this issue had arisen (Cargill having initially submitted demurrage calculations with an allowance for bad weather up to a particular time and then from that time basing the allowance on force majeure, but, by the time of the arbitration Cargill had submitted that the earlier demurrage calculation had been mistaken), the Arbitrator’s view being that this was a belated attempt to resile from the earlier approach.

213 As explained by Mr Gleeson, Excel’s argument was that the Cargo Handling Rate definition, which included the concept of Weather Working Days, encapsulated the concept that if there was not a usable period of time to load the coal on the ship because of bad weather, that was not taken into account when calculating at what average rate the coal had to get onto the ship. Insofar as the Arbitrator noted that he considered the argument difficult but made a finding which was reasonably open to him to do (whether or not he had acted in error in taking into account subsequent conduct) it is submitted by Mr Gleeson that this does not surmount the high hurdle for manifest error of law. In other words, it is said that if this is reasonably arguable and a question of construction, whether or not the Arbitrator in fact reached the wrong conclusion (and how he did so) is immaterial.

214 Mr Stevenson contended that the relationship between the two alleged errors was that the Arbitrator’s failure to consider Cargill’s alternative clause 7.11.2 argument led him into error in relation to the weather working point. It is submitted that if the Arbitrator had accepted Cargill’s Alternative Argument then that would have given rise to an inconsistency with the proposition that laytime did not run on any day which was not a weather working day, i.e. for some days after 8 June. (Mr Stevenson submitted that the weather working day argument was irreconcilable with the Alternative Argument advanced by Excel.) (In that regard, the Arbitrator does seem to have had regard to the interrelationship between the respective clauses in that he saw the weather working day point as reaching the same outcome as that he had reached on the clause 7.11.2 argument.)

215 It seems to me that the proposition put by Cargill (that WWD was no more than an integer in the definition of the Cargo Handling Rate and thence a step in determining the amount of time to be allowed as laytime) has considerable force but I do not see this as a manifest error of law on the face of the award (as opposed to an issue on which there is strong evidence of error). It seems to me that there were different conclusions reasonably open as to the construction of the relevant definition and its operation in the context of the agreement as a whole.

216 At para 163 the Arbitrator makes it clear that the reliance made by him on the definition argument was as support for his primary conclusion on the construction of clause 7.11.2, saying (after having first concluded that time does not count towards delay from 8.15am on 8 June by reason of force majeure) that: “I would also accept the same result would be achieved by reliance on the concept of weather working days”. Mr Gleeson submitted that the finding that loading was hindered by bad weather from 8.15am on 8 June 2007 was a finding of fact. The only question of law was whether, as a matter for construction, whether the Arbitrator should have accepted the proposition that the reference to weather working days had a substantive negative operation in the definition. Mr Gleeson says that is not a manifest error in the sense required by the authorities. I agree.

217 In any event, the Arbitrator’s finding on this issue was not ultimately determinative of Cargill’s claim. It was an expression of opinion that the same result could have been achieved by a different route. The Arbitrator was of the view that in the circumstances time did not count towards laytime from 8 June by reason of force majeure. The fact that he was also prepared to accept that the same result would be achieved by reliance on the concept of weather working days (paras 162/163) does not take the matter any further. (This, it seems to me, also counts heavily against the exercise of discretion to revisit the issue assuming the basis for such relief were otherwise made out.)

Strong evidence of error of law and effect of determination on certainty of commercial law?

218 Again, it is noted that the test on this alternative threshold requirement is not who is ultimately right or wrong as a matter of law on the disputed question(s) of construction, but the strength of the claim that there has been an error of law on the construction issues. In the absence of a finding that there has been a manifest error of law, what is necessary is that there be “strong evidence” that the Arbitrator made an error of law and that the determination of that question is one which may add or be likely to add substantially to the certainty of commercial law.

219 In Promenade Investments, at 226, Sheller JA said:

The expression “strong evidence that the arbitrator … made an error of law” suggests first what might otherwise be called on the leave application a strong prima facie case and second an error of law not manifest on the face of the award and demonstrable by evidence

220 Is there a strong prima facie case that the Arbitrator made an error of law in not holding that the period of time between the occurrence of a force majeure event and the giving of a notice of intention to claim force majeure (whether or not that be as early as practicable) should be counted as laytime? The issues as framed by the Arbitrator did not require a direct determination of that question but it was thrown up by the argument in relation to the adequacy or validity of the clause 17.2 notice.

221 To my mind, both arguments were reasonably available as a matter of construction. As against that contended for by Cargill, it seems to me that had the parties intended laytime to continue after the occurrence of a force majeure event up until the time that a notice of intention to claim force majeure was given (irrespective of whether that notice was given as early as practicable) then there was a very simple way to do so and it would not have necessitated the use of any concept of delay. In that regard, there seems a contradiction in terms between the situation where the notice was given as early as practicable and that where there was in any event an operative delay for the purposes of counting laytime. However, whatever the prospects of success for Cargill’s argument on that point ultimately may have been, I am not convinced that there is strong prima facie evidence that the Arbitrator erred in his construction of the clause.

222 As to the second of the alleged errors, for the reasons adverted to above, I would have been inclined to find that the weather working days point was one as to which there was strong evidence that an error of law had been made in this regard (both by reference to the use of post-contractual conduct and by reference to the application of a definition used in context for the purposes of another). On this issue I would have been satisfied that the determination of the construction of clause 7.11.2 and the extent to which it was affected by the reference to Weather Working Days in the definition of Cargo Handling Rate was one which would be likely to add certainty to commercial law. This relates to an issue of construction of clauses in a standard form agreement (not a one-off determination on the facts of this particular case.) Even if its use is not as wide as that suggested by Cargill, the construction of such a clause would in my view have potential significance beyond that of the present case. While the particular form of the agreement in use has changed, the force majeure provisions have not changed in the current version and hence I accept that the validity of the construction put by Cargill is one which would be likely to add to the certainty of commercial law.

223 However, as Mr Stevenson accepts, the alleged error as to the operation of the weather working days definition is of no moment unless Cargill obtains leave to appeal on the Alternative Argument in relation to clause 7.11.2. Therefore this is not an error that of itself would have affected the overall outcome of the dispute (and thus the first of the threshold requirements is not met in relation to this error).

(iv) Has there been a denial of natural justice for the purposes of a review under the Model Law?

224 It is conceded that there is a more limited basis for review of arbitral awards under the Model Law, that being contained in article 34. The only relevant basis for review asserted in the present case is that contained in article 34(2)(b)(ii), namely that the award is in conflict with the public policy of the State.

225 By reference to s 19 of the Commonwealth Act, there is a conflict with the public policy of Australia if there has been a breach of the rules of natural justice. Mr Stevenson submitted that the Arbitrator did not deal with Cargill’s clause 7.11.2 Alternative Argument and thus there has been a breach of the hearing rule of natural justice.

226 The “hearing rule” (to use the terminology adopted by Aronson, Dyer and Groves, Judicial Review of Administrative Action, 3rd ed, 2004, at 370) (or audi alteram partem rule), is one of the twin pillars of natural justice, the other being the bias rule (nemo debet judex esse sua in propria causa) (as explained in Carbotech-Australia Pty Ltd & anor v Yates & 14 ors [2008] NSWSC 540, at [46], per Brereton J). (There is no suggestion of bias in this case.) At the most basic level, the hearing rule requires a decision-maker to hear a person before making a decision affecting that person's interests.

227 The High Court in Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26; (2003) 197 ALR 389, said at [24];

228 The operation of the hearing rule depends on the circumstances of the case in which it is applicable (Bread Manufacturers of NSW v Evans [1981] HCA 69; (1994) 180 CLR 404, at [18], per Gibb CJ; Durayappah v Fernando (1967) 2 AC 337, at 414). In Russell v Duke of Norfolk (1949) 1 All ER 109, at 118, Tucker LJ said:

229 In Mobil Oil Australia Pty. Ltd. v Federal Commissioner of Taxation [1963] HCA 41; (1963) 113 CLR 475 (at 504) Kitto J stated:

230 (The above passages from Mobil Oil and Russel were cited with approval in The Queen v Commonwealth Conciliation and Arbitration Commission: ex parte Angliss Group (1969) 122 CLR at 546, 552.)

231 The mere fact that a decision is made that is adverse to the interests of a party does not mean that the party has been ignored or denied natural justice in breach of the hearing rule (Carcione Nominees Pty Ltd & Anor v Western Australian Planning Commission & Ors [2005] WASCA 56, at [93]).

232 In Bread Manufacturers, whilst it was found that the hearing rule did not apply to the decision maker in question, Gibbs CJ was of the view that, even if the rule did apply, it would have been satisfied in the circumstances of that case where “the Commission had received and no doubt considered the submissions of the Association that prices should be increased, and did make an increase in prices generally” (at [18]).

233 The Alternative Argument is, I accept, an argument of substance. It cannot be said to be trifling or to have insignificant consequences if successful. The relevant facts upon which the argument was based (namely the giving of the notice on 13 June 2007 some days after the event amounting to force majeure) were established.

234 (So far as the second alleged error is concerned, it is not submitted that there was a denial of natural justice by failing to deal with the point - because the argument was clearly dealt with – rather, the submission is that the Arbitrator was led into the error by his denial of natural justice on the 7.11.2 argument. It is said that had the Arbitrator addressed the clause 7.11.2 argument and seen that it contradicted the weather working days argument (which he had found to be a difficult issue) he would not have come to the conclusion he did on weather working days. Thus it is said that if the matter were to be re-agitated, the submission would be that if the clause 7.11.2 argument was correct, then the “tentative” conclusions in relation to weather working days could not be correct.)

235 Where I have some difficulty, however, is as to whether the clause 7.11.2 argument was clearly articulated. That would be the case only insofar as the Alternative Argument as now put can be said to emerge clearly from the written submissions and the exchange extracted earlier above.

236 There is considerable doubt in my mind is as to whether what was being clearly articulated in the submissions put to the Arbitrator is the proposition for which Cargill now contends, namely that laytime continues to run unless and until a notice of intention to claim force majeure is given (irrespective of whether the notice was given as early as practicable) and that on the proper construction of clause 7.11.2, “delay” in the giving of a notice will occur whenever the notice is not given simultaneously with the force majeure event. There is no suggestion in the Arbitrator’s reasons that such a proposition was clearly articulated nor does it emerge clearly from the written submissions (particularly when reference is made to the statement contained in the submissions that the requirement for notice to be given as early as practicable is reinforced by the reference to delay in clause 7.11.2).

237 Although Mr Stevenson submitted that there was no need for Mr Nell, Counsel appearing for Cargill on that application, to make any argument about whether notice was given as early as practicable in order to run the Alternative Argument, the argument was linked in the sense that it was predicated on a determination against Cargill on its principal submission that a notice which was not given as early as practicable was not valid and effective for the purposes of the agreement.

238 Mr Gleeson’s submission, as I understand it, on the natural justice issue was that on the clause 7.11.2 argument, there are two possibilities: either Excel is correct in its submission that the argument was not put before the Arbitrator in exactly the way it was put to me (and accordingly Cargill cannot be heard to complain that there was a denial of natural justice by reason of any failure to deal with the argument in the way in which it was put) or, if the argument put to the Arbitrator was, as Excel contends, predicated on there being a notice which was not given as early as practicable (but nevertheless still a valid notice), then the Arbitrator dealt with it and there was no denial of natural justice (even if the Arbitrator may have been wrong).

239 I accept Mr Gleeson’s submission that there is nothing in what was put to the Arbitrator which squarely raised the proposition that if the notice is valid and effective (because it was given as early as practicable) clause 7.11.2 nevertheless has the effect that time does not count on force majeure because any gap in time between the objective event of force majeure and the giving of the notice is delay. The proposition that one can satisfy a contractual obligation to do something as early as practicable but at the same time there can be an operative delay was not one that seems to me to have been clearly put to the Arbitrator.

240 If, closely read, the written submissions did go so far, is there anything to suggest that the Arbitrator did not properly consider the argument just because it was not articulated in those terms in the award? The Arbitrator clearly addressed his mind during the course of argument to the question of what consequence might flow from the fact that the notice was not given timeously. Ultimately, his finding was that the notice was given as early as practicable and, by reference to the result which followed from that, he must have considered that there was no delay for the purpose of clause 7.11.2 where there was a notice which had been given as early as practicable.

241 In the circumstances, I am not satisfied that the argument now sought to be put by Cargill was clearly articulated before the Arbitrator. That disposes of the claim that there has been a denial of natural justice. Insofar as a version of the argument was put, it seems to have been heard by the Arbitrator and what he has done is to reach a conclusion which implicitly rejected it. I am not satisfied that this amounts to a denial of natural justice.

(v) Discretionary issues

242 This issue does not arise on the application for leave to appeal under the State Act, as the jurisdictional and threshold requirements for leave under the State Act have not all been established. Had they been, then I would have approached the question of discretion cognisant of the weight evident from the legislation placed on the exercise of judicial restraint in interference with or intervention in arbitral decisions which otherwise would be final and binding. I accept that there should be only limited curial intervention. Similar issues arise when considering the exercise of discretion under the Model Law, though they do not strictly arise for determination in the present case as I have not found a denial of natural justice.

243 In its Commercial List Response, Excel raises the following matters in relation to whether the court should exercise discretion to grant leave to appeal (assuming the jurisdictional and threshold requirements have been satisfied:

(a) the one-off nature of the force majeure events giving rise to the dispute;

(b) the qualifications of the arbitrator (he being an experienced Queen’s Counsel and former Federal Court Judge) appointed by agreement of the parties as sole arbitrator in order to resolve their dispute;

(c) the amount in dispute (demurrage from 8 June being calculated at USD850,000, or from 21 June as being in the order of USD300,000) weighed against the (unquantified) cost of further proceedings to review the partial award;

(d) the assertion that this is an attempt generally to re-litigate the subject matter of the arbitration;

(e) that the contentions, to the extent that they raise questions of law, are inappropriate for leave to appeal as they involve issues of fact that must be reviewed or decided in order to dispose of the alleged questions of law;

(f) that the contentions, to the extent that they raise questions of law, do not involve bare questions of law, but rather the examination of how, against the contractual structure, the parties acted in the particular case; and

244 As to the last three grounds, they were not raised in oral submissions and it is not clear to me how it is said that the determination of the construction questions as put to me would involve any need to revisit factual findings of the Arbitrator.

245 What seems to me to be more relevant is that the determination of the first alleged error would not overcome the finding in relation to estoppel/waiver in respect of the claim for demurrage for the bulk of the period claimed and the determination of the second alleged error would take the matter no further as this was no more than an alternative means of reaching a conclusion already. As to the other grounds, the most relevant seem to me to be the fact that the financial consequences to flow from any re-determination are by no means as substantial as have been asserted (and, in view of the finding as to the clause 17.3 operation, there may be little practical benefit at all from a reconsideration of the matters of which complaint is made) and the fact that Cargill has had a considered hearing (and one on far more than the usual number of issues for this kind of arbitration in the opinion of the Arbitrator).

246 In Promenade Investments, after considering the language used in the expression “manifest error”, Sheller JA went on to say, at 225:

The Nema

247 As to the discretion, in Promenade Investments, at 221, Sheller JA said:

New South Wales Parliamentary Debates

“If arbitration is to be encouraged as a settlement procedure and not as a dry run before litigation, a more restrictive criterion for the granting of leave is desirable and the parties should be left to accept the decision of the arbitrator whom they have chosen to decide the matter in the first place.”

The Nema

248 I am not satisfied that this is a case (had the jurisdictional and threshold requirements been satisfied for the grant of relief either under the State Act or the Model Law) in which, as a matter of discretion, leave to appeal or the remission of the matter to the Arbitrator should be granted or ordered as the case may be. The complexity of the construction issues as now put, when coupled with the fact that they do not appear to have been clearly articulated in that fashion before, suggests strongly that this is an attempt to re-litigate the issues which have already been dealt with in some detail. There should be finality in that exercise, as provided for under the parties’ arbitration agreement.

Conclusion

249 For the reasons outlined above, I am of the view that the parties did not opt out of the Model Law and hence the State Act does not apply. (Had I found otherwise, I would have held that the claims made in the arbitration were maritime claims for the purposes of overriding the parties’ exclusion agreement and hence this Court would have had jurisdiction to entertain the application for leave to appeal.)

250 Had the State Act applied, I would not have been satisfied that the threshold requirements for the grant of leave to appeal were met. Although I consider there is strong evidence of error in relation to the conclusion drawn as to the operation of the definition of weather working days for the purposes of calculating laytime, and I accept that this question is one the determination of which is likely to add to the certainty of commercial law, it is a question which (considered in isolation of the Alternative Argument in relation to clause 7.11.2) would not substantially affect the parties’ rights. In any event I would not have been satisfied that this was a case in which I should have exercised discretion to grant leave to appeal in relation to that alleged error.

251 I am not satisfied that there has been a denial of natural justice.

252 I therefore dismiss the application by Cargill. As Mr Gleeson indicated that, in that event, Excel would wish to be heard in relation to costs, I will deal with that aspect of the matter at a time convenient to Counsel.

**********

Citations

Cargill International SA v Peabody Australia Mining Ltd [2010] NSWSC 887

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CITATION:	Cargill International SA v Peabody Australia Mining Ltd [2010] NSWSC 887
HEARING DATE(S):	10 June 2010
JUDGMENT DATE :	11 August 2010
JURISDICTION:	Equity Commercial List
JUDGMENT OF:	Ward J
DECISION:	Plaintiff's application dismissed
CATCHWORDS:	COMMERCIAL ARBITRATION - application under s 38(4)(b) of Commercial Arbitration Act 1984 (NSW) for leave to appeal from Arbitrator’s award on grounds of manifest error of law or strong evidence of error or in the alternative to remit questions of law to Arbitrator under article 34(2)(b)(ii) of Model Law - if former, whether leave to appeal should be granted under Commercial Arbitration Act - if latter whether denial of natural justice under the Model Law - HELD - Model Law applies - referral of dispute under rules of ICC did not operate as an ‘opt-out’ of Model Law under s 21 of the International Arbitration Act 1974 (Cth) – the decision in Eisenwerk Hensel Bayreuth Dipl-Ing Burkhardt GmbH v Australian Granites Ltd [2001] 1 Qd R 461 is plainly wrong and should not be followed - referral of dispute to ICC Rules did not indicate that parties intended to opt-out of Model Law to extent it applied as the curial law or lex arbitri - had Commercial Arbitration Act applied, threshold requirements for grant of leave not satisfied - discretion to grant leave would not have been exercised in any event - no denial of natural justice - plaintiff’s application dismissed - ADMIRALTY AND MARITIME JURISDICTION - whether dispute was one arising out of a maritime claim - HELD - dispute did arise out of a maritime claim so that exclusion agreement by adoption of article 28(6) of the ICC Rules would not apply
LEGISLATION CITED:	Admiralty Act 1988 (Cth) Commercial Arbitration Act 1984 (NSW) International Arbitration Act 1974 (Cth) International Arbitration Amendment Bill 1988 (Cth) International Arbitration Amendment Act 2010, No 97 (Cth)
CASES CITED:	Aerospatiale Holdings Australia Pty Ltd v Elspan International Ltd (1992) 28 NSWLR 321 Agricultural & Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570 American Diagnostica Inc v Gradipore Ltd (1988) 44 NSWLR 312 Appleton Papers Inc v Tomasetti Paper Pty Ltd (1983) 3 NSWLR 208 Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 BCCI v Ali [2002] 1 AC 251 Beaufort Developments (NI) Ltd v Gilbert-Ash (NI) Ltd [1999] 1 AC 266 Beveridge v Whitton [2001] NSWCA 6 Bread Manufacturers of NSW v Evans [1981] HCA 69; (1994) 180 CLR 404 British Sugar plc v NEI Power Projects Ltd (1997) 87 BLR 42 CAL No 14 Pty Limited v Motor Accidents Insurance Board [2009] HCA 47; (2009) 239 CLR 269 Carbotech-Australia Pty Ltd & anor v Yates & 14 ors [2008] NSWSC 540 Carcione Nominees Pty Ltd & Anor v Western Australian Planning Commission & Ors [2005] WASCA 56 Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26; (2003) 197 ALR 389; Durayappah v Fernando (1967) 2 AC 337 Eisenwerk Hensel Bayreuth Dipl-Ing Burkhardt GmbH v Australian Granites Ltd [2001] 1 Qd R 461 Equuscorp v Glengallan [2004] HCA 55; (2004) 218 CLR 471 Export Credits Guarantee Department v Universal Oil Products Co [1983] 2 All ER 205; [1983] 1 WLR 399 Farah Constructions Pty Limited v Say-Dee Pty Limited [2007] HCA 22; (2007) 230 CLR 89 Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 Gatoil International Inc v Arkwright–Boston Manufacturers Metal Insurance Co [1985] AC 255 Gett v Tabet (2009) 254 ALR 504; [2009] NSWCA 76 Gordion Runoff Limited v Westport Insurance Corporation [2010] NSWCA 57 Heilbrunn v Lightwood plc [2007] FCA 1518; (2007) 164 FCR 1 Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 John Holland Pty Ltd aka John Holland Construction & Engineering Pty Ltd v Toyo Engineering Corp (Japan) [2001] 2 SLR 262 Kirk v Industrial Relations Commission of New South Wales [2010] HCA 1; (2010) 262 ALR 569 Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 Mobil Oil Australia Pty. Ltd. v Federal Commissioner of Taxation [1963] HCA 41; (1963) 113 CLR 475 Natoli v Walker (1994) 217 ALR 201 Nishina Trading Co Ltd v Chiyoda Fire & Marine Insurance Co Ltd (The Mandarin Star) [1968] 1 WLR 1325; [1968] 3 All ER 712; [1968] 2 Lloyd's Rep 47 Pacific Carriers v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 Port of Geelong Authority v The “Bass Reefer” (1992) 37 FCR 374 Promenade Investments Pty Ltd v State of New South Wales (1992) 26 NSWLR 203 Raguz v Sullivan [2000] NSWCA 240 Russell v Duke of Norfolk (1949) 1 All ER 109 Sharah v Healey [1982] 2 NSWLR 223 Shell International Petroleum Ltd v Gibbs [1983] 2 AC 375 Smith Ltd v H & S International [1991] 2 Lloyd’s Rep 127 Sunport Shipping Ltd v Tryg-Baltica International (UK) Ltd [2003] 1 Lloyd’s Rep 138 The “Catur Samudra” [2010] SGHC 18 The Kalliopi A [1988] 2 Lloyd’s Rep 101 The Radauti [1987] 2 Lloyd’s Rep 276 The Solon [2000] CLC 593 The Queen v Commonwealth Conciliation and Arbitration Commission: ex parte Angliss Group (1969) 122 CLR The Zeus [1888] 13 PD 188 Toll v Alphapharm [2004] HCA 52; (2004) 219 CLR 165 Tradhol Internacional SA v Colony Sugar Mills Limited 2009 WL 3929893 (C.A.2(N.Y)) (20/11/09) Trustees of Henry Smith’s Charity v AWADA Trading & Promotion Services (1983) 47 P&CR 607 Westcott v Hahn [1918] 1 KB 495 Westport Insurance Corporation v Gordion Runoff Ltd [2009] NSWSC 245
TEXTS CITED:	Aronson, Dyer and Groves, Judicial Review of Administrative Action, 3rd ed, 2004 Barret-White S., and Kee C., “Enforcement of Arbitral Awards where the seat is Australia – how the Eisenwerk Decision might still be a sleeping assassin: (2007) 24(5) Journal of International Arbitration 515 Blackaby N., Partasides C., Redfern A., and Hunter M., Redfern and Hunter on International Arbitration, 5th edn, Oxford University Press, 2009 Davies S., “International Arbitration: when arbitral rules and procedural rules collide”, Australian Mining and Petroleum Law Association Yearbook, 2002 Chow P., “Issues in International Commercial Arbitration: Conflict between Model Law and Arbitral Rules” (2003) 19 BCL 426 Croft and Fairlie, “The New Framework for International Commercial Arbitration in Australia”, ACICA Conference, December 2009 Dicey, Morris and Collins, The Conflict of Laws, Sweet & Maxwell, 2006 and updating October 2009 edn Gehle B., “The Eisenwerk decision is generally considered as bad law”, Vindobona Journal of International Commercial Law & Arbitration, 2009 13 VJ 251 Greenberg S., “ACICA’s New International Arbitration Rules” (2006) 23 (2) Journal of International Arbitration 189 Heydon, “Limits to the Powers of Ultimate Appellate Courts” (2006) 122 LQR 399 Lewison, The Interpretation of Contracts, 4th edn, Sweet & Maxwell, London, 2007 Megens P. and Cubitt C., “Arbitrators' perspective: the evolving face of international arbitration - the past, the present and the future”, International Arbitration Law Review, 2010, 13(1), 1-7 Mustill and Boyd, Commercial Arbitration, 2nd edn, Butterworths, 1989 Pryles M., “Exclusion of the Model Law” [2001] Int ALR 175 Submissions made to the Commonwealth Attorney General, in response to the Discussion Paper of 21 November 2008, by ICC Australia, ACICA, the Chartered Institute of Arbitrators, the NSW Bar Association, the Law Society of NSW, the Law Council of Australia, and the Victorian Bar
PARTIES:	Cargill International SA (Plaintiff) Peabody Australia Mining Ltd (Defendant)
FILE NUMBER(S):	SC 2010/009966
COUNSEL:	J Stevenson SC with D McLure (Plaintiff) F Gleeson SC with K Day (Defendant)
SOLICITORS:	Macpherson + Kelley Lawyers (Plaintiff) Freehills (Defendant)