Ottoway Engineering Pty Ltd v ASC AWD Shipbuilder Pty Ltd

Case [2017] SASC 69

SUPREME COURT OF SOUTH AUSTRALIA

(Civil: Application)

OTTOWAY ENGINEERING PTY LTD v ASC AWD SHIPBUILDER PTY LTD

[2017] SASC 69

Judgment of The Honourable Justice Blue

12 May 2017

ARBITRATION - THE AWARD - APPEAL OR JUDICIAL REVIEW - PROCEDURE - APPEALS AND LEAVE TO APPEAL - LEAVE TO APPEAL FROM DECISION OF ARBITRATOR - QUESTION OR ERROR OF LAW

ARBITRATION - THE AWARD - APPEAL OR JUDICIAL REVIEW - GROUNDS FOR REMITTING OR SETTING ASIDE - ERROR OF LAW

ARBITRATION - THE SUBMISSION AND REFERENCE - DISPUTE OR DIFFERENCE WITHIN THE MEANING OF AN ARBITRATION CLAUSE

APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - RIGHT OF APPEAL - WHEN APPEAL LIES - ERROR OF LAW - PARTICULAR CASES INVOLVING ERROR OF LAW - FAILURE TO GIVE REASONS FOR DECISION - ADEQUACY OF REASONS

CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - THE CONTRACT - CONSTRUCTION OF PARTICULAR CONTRACTS AND IMPLIED CONDITIONS - IMPLIED TERMS

Application for leave to appeal against arbitration award.

In 2009 the parties entered into a contract for pipe fabrication and assembly.  The contract included clause 25 providing for disputes to be referred to and finally resolved by arbitration in accordance with the IAMA Rules. 

In 2016 the respondent served a notice of arbitration claiming $387,266 reimbursement of its capital contribution for the purchase of certain equipment.  The appellant cross-claimed $1,045,469 for additional overhead expended in carrying out the works. The parties attended a preliminary conference with the arbitrator. It was agreed that there was no written agreement that any questions should not be determined in accordance with law.

The arbitrator ultimately made an award accepting the respondent’s claim and dismissing the appellant’s cross claim. The appellant seeks leave to appeal against the award on the ground that the arbitrator erred in law by not providing reasons or sufficient reasons for key findings.

When the parties entered into the contract in 2009, the Commercial Arbitration and Industrial Referral Agreements Act 1986 created a right of appeal against an award on an opt-out basis. When the Commercial Arbitration Act 2011 was enacted, it created a similar right of appeal but on an opt-in basis such that a right of appeal only existed if the parties agreed that an appeal may be made.

The respondent denies that the parties agreed that an appeal may be made. The appellant contends that the parties so agreed either at the preliminary conference in 2016 or as an implied term of their contract in 2009.

The appellant contends that the arbitrator’s decision is either obviously wrong or open to serious doubt and the question is one of general public importance.

Held:

1.   The parties did not agree at the preliminary conference in April 2016 that an appeal may be made against an award (at [23]).

2.  It was an implied term of the contract made in 2009 that an appeal may be made against an award (at [59]).

3.  The arbitrator’s decision is not obviously wrong but it is open…

Continue reading Ottoway Engineering Pty Ltd v ASC AWD Shipbuilder Pty Ltd

Sign in free to access the full text

Details
AGLC
Ottoway Engineering Pty Ltd v ASC AWD Shipbuilder Pty Ltd [2017] SASC 69
Case
[2017] SASC 69
Decision Date

CaseChat Overview and Summary

Ottoway Engineering Pty Ltd, the applicant, appealed against the decision of the arbitrator in their dispute with ASC AWD Shipbuilder Pty Ltd, the respondent. The dispute originated from a contract for the construction of a vessel, which included an arbitration clause. The applicant sought leave to appeal the arbitrator's award, arguing that the arbitrator's reasons did not comply with the statutory requirements under the Commercial Arbitration Act 2011 (SA). The central legal issues before the court were whether the court had the discretion to grant leave to appeal under the Act and whether the applicant's reasons for appealing were valid.

The court examined the statutory framework for appeals from arbitral awards under the Act. It found that the court had a residual discretion to grant leave to appeal even if the mandatory criteria were met. The court held that the applicant's reasons for appealing were valid, as the arbitrator's reasons did not sufficiently address the legal principles applied in making the award, thus failing to comply with the statutory requirement for reasons under section 31(3) of the Act. The court concluded that the applicant's reasons for appealing were legitimate and that the grant of leave to appeal was appropriate in the circumstances. Consequently, the court granted leave to the applicant to appeal against the arbitrator’s award.

The court’s decision was grounded in its interpretation of the Commercial Arbitration Act 2011 (SA), particularly sections 31(3) and 34A(3)(d), which address the requirements for reasons in arbitral awards and the court’s discretion in granting leave to appeal. The court found that the arbitrator's failure to provide adequate reasons for the award constituted an error of law, warranting an appeal. The court's decision underscored the importance of compliance with statutory requirements for reasons in arbitral awards and recognised the court's role in ensuring that such requirements are met.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Under the 1986 Act, it was clearly established that the Court had a residual discretion whether to grant leave if the mandatory criteria were established.[64] The inclusion of the criterion in section 34A(3)(d) probably covers the matters that would formerly have been taken into account in the exercise of the residual discretion. However, assuming that there remains a residual discretion, it is appropriate in the circumstances that that discretion be exercised so as to grant leave to appeal.[64] Westport Insurance Corporation v Gordian Runoff Limited (2011) 244 CLR 239 at [29] and [38] per French CJ, Gummow, Crennan and Bell JJ and [165] per Kiefel J.Conclusion I grant leave to Ottoway to appeal against the arbitrator’s award on the ground that the arbitrator’s reasons do not comply with subsection 31(3) of the Act. I will hear the parties as to consequential matters and directions for the hearing and determination of the appeal.

Ratio Decidendi

Legal Principle Established

At the preliminary conference, various matters were discussed and agreed. Minutes were subsequently produced by the arbitrator and signed by all parties as correct. The minutes mainly took the form of questions and answers. Question 2.7 provided:2.7Is there any written agreement between the parties that any question that arises for determination in the arbitration shall not be determined according to law?[s. 28(1) Commercial Arbitration Act (SA)] No Ottoway contends that this amounted to an agreement that the arbitration would be determined according to law, thereby implicitly being an agreement that either party could have recourse to an appeal subject to leave on questions of law. Section 28 of the Act provides:28—Rules applicable to substance of dispute(1)The arbitral tribunal must decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute.(2)Any designation of the law or legal system of a given State or Territory must be construed, unless otherwise expressed, as directly referring to the substantive law of that State or Territory and not to its conflict of laws rules.(3)Failing any designation by the parties, the arbitral tribunal must apply the law determined by the conflict of laws rules which it considers applicable.(4)The arbitral tribunal must decide the dispute, if the parties so agree, in accordance with such other considerations as are agreed to by the parties.(5)In all cases, the arbitral tribunal must decide in accordance with the terms of the contract and must take into account the usages of the trade applicable to the transaction. Section 28 proceeds on the premises that ordinarily the choice of substantive law will be made by the parties in their contract and that, under common law conflict of law principles, parties to a contract are entitled to make their own choice of the substantive law that applies to their rights and obligations under the contract. Section 28 also permits the parties to agree on the applicable substantive law after entering into their contract and before determination of the dispute by arbitration, but this may be expected to be rare. The contract was entered into in South Australia and clause 26.13 provided that it was to be governed by the laws of South Australia. There was no doubt that it was the law of South Australia that comprised the substantive law governing the parties’ rights and liabilities under the contract and the parties never contemplated otherwise. Question 2.7 was poorly drafted because subsection 28(1), to which it refers, addresses only choice of substantive law. However, the body of question 2.7 refers to determination “according to law”, which suggests that it is directed instead to subsection 28(4), which enables the parties to agree, for example, that an arbitration be determined in a procedural sense in accordance with equity, good conscience and the substantial merits of the case.[2] Indeed, question 2.7 appears to have been drafted by reference to subsection 22(1) of the 1986 Act and through inadvertence not amended following enactment of the Act. [2] The inclusion of question 2.8 is some contra-indication of this as it asks whether there is any written agreement that the arbitrator decide the substance of the dispute according to general standards of fairness and justice only.