Spaseski v Mladenovski
[2019] WASC 65
•5 MARCH 2019
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: SPASESKI -v- MLADENOVSKI [2019] WASC 65
CORAM: KENNETH MARTIN J
HEARD: 29 JANUARY 2019
DELIVERED : 5 MARCH 2019
FILE NO/S: ARB 13 of 2018
BETWEEN: MOMCULA SPASESKI
First Plaintiff
JASMINKA SPASESKA
Second Plaintiff
AND
CVETAN MLADENOVSKI
Defendant
FILE NO/S: ARB 14 of 2018
BETWEEN: CVETAN MLADENOVSKI
Plaintiff
AND
MOMCULA SPASESKI
First Defendant
JASMINKA SPASESKA
Second Defendant
Catchwords:
Arbitration - Cross-applications to enforce awards and to set aside - Small scale domestic residential building dispute - Four day arbitration - Alleged failure to sufficiently allow claimant builder to present his case by not allowing him to give evidence - Alleged public policy violation by alleged failure to afford natural justice - Last half day of arbitration completed in builder's absence due to ill health and hospital admission - Builder's case rejected and judgment and indemnity costs awarded against him by arbitrator
Legislation:
Commercial Arbitration Act 2012 (WA)
Result:
Application to enforce awards granted
Application to set aside awards refused
Representation:
ARB 13 of 2018
Counsel:
| First Plaintiff | : | Mr A J C Mossop |
| Second Plaintiff | : | Mr A J C Mossop |
| Defendant | : | Mr S D Majteles |
Solicitors:
| First Plaintiff | : | Jackson McDonald |
| Second Plaintiff | : | Jackson McDonald |
| Defendant | : | Fletcher Law |
ARB 14 of 2018
Counsel:
| Plaintiff | : | Mr S D Majteles |
| First Defendant | : | Mr A J C Mossop |
| Second Defendant | : | Mr A J C Mossop |
Solicitors:
| Plaintiff | : | Fletcher Law |
| First Defendant | : | Jackson McDonald |
| Second Defendant | : | Jackson McDonald |
Case(s) referred to in decision(s):
AKN v ALC [2015] SGCA 18
Amasya Enterprises Pty Ltd v Asta Developments (Aust) Pty Ltd [2016] VSC 32
Cameron Australasia Pty Ltd v AED Oil Ltd [2015] VSC 163
Grand Pacific Holdings Ltd v Pacific China Holdings Ltd (in liq) (No 1) [2012] 4 HKLRD 1
Indian Farmers Fertiliser Cooperative Ltd v Gutnick [2015] VSC 724; (2015) 304 FLR 199
TCL Air Conditioner (Zhongshan) Company Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361
TCL Air Conditioner (Zhongshan) Company Ltd v Castel Electronics Pty Ltd [2014] FCAFC 83; (2014) 311 ALR 387
TCL Air Conditioner (Zhongshan) Company Ltd v Judges of the Federal Court of Australia (2013) 251 CLR 533
Triulzi Cesare SRL v Xinyi Group (Glass) Co Ltd [2015] 1 SLR 114
KENNETH MARTIN J:
The applications
The counterpart applications which are ARB 13 of 2018 and ARB 14 of 2018 were heard together before me on 29 January 2019 (together 'the present applications').
ARB 13 of 2018
By ARB 13 of 2018 the plaintiffs, Mr and Mrs Spaseski (who I refer to together as 'the Owners'), seek orders pursuant to s 35 of the Commercial Arbitration Act 2012 (WA) (the CA Act) for the 'enforcement' of a partial final award dated 10 September 2018 and a following final award dated 6 October 2018 against the defendant, a Mr Cvetan Mladenovski (who I will refer to as 'the Builder').
The Builder resists the Owners' enforcement application on the basis of the statutory criteria as identified under s 36(1) of the CA Act. In particular, reliance is placed by the Builder upon s 36(1)(a)(ii) to resist enforcement of these arbitral awards in this court on the basis that the Builder was 'otherwise unable to present the party's case'. A second basis of resistance as was invoked by the Builder against enforcement sought by the Owners is pursuant to s 36(1)(b)(ii), on the basis that this court should find:
The recognition or enforcement of the award would be contrary to the public policy of this State.
ARB 14 of 2018
The Builder then brings a counterpart application. This is ARB 14 of 2018, which pursues relief for the Builder under s 34 of the CA Act and seeks to have the awards of 10 September and 6 October 2018 set aside under s 34(2). The grounds upon which the Builder seeks to have those two arbitral awards set aside invoke, in effect, the provisions of s 34(2)(a)(ii) and s 34(2)(b)(ii). Those provisions, textually, are on all fours with and essentially counterparts to the provisions of s 36(1) to which I have referred in the context of the Builder's asserted resistance in ARB 13 of 2018. In short, the same basis on which the Builder seeks to resist the enforcement by the Owners of the awards made against him is the basis for the Builder's counterpart application seeking to set aside those awards under s 34(2).
Under the Builder's originating summons in ARB 14 of 2018, the Builder elaborates on his invocation of these statutory provisions in order to set aside the two awards. The bases of his grounds are:
(1)the plaintiff (ie, the Builder) was denied the opportunity to give evidence himself during the hearing of the arbitration;
(2)part of the arbitration was heard in the absence of the plaintiff (ie, the Builder); and
(3)the plaintiff (ie, the Builder) was denied a fair opportunity to cross-examine the defendants' (ie, the Owners') witnesses.
The Builder's originating summons then continues on as regards those three asserted grounds to contend their effect was that the Builder was 'unable to properly present his case' and also that he 'was denied natural justice in conflict with the public policy of the State of Western Australia'.
In essence then, it may be seen that the Builder's public policy invocations by way of resistance to enforcement of these awards against him, and as a counterpart basis upon which he relies in seeking to have the awards set aside under s 34(2)(b)(ii), is the alleged denial of natural justice to the Builder at the arbitration. That is said to constitute the basis upon which the award is 'in conflict with the public policy of the State of Western Australia'.
Hence, an essential overlap as between the two arbitration proceedings in this court, ARB 13 of 2018 and ARB 14 of 2018, is now apparent. Consequently, it was appropriate for both matters to be heard together, as has transpired.
Shortly I will set out a basic chronology of events in order to show the underlying background that surrounds the present applications. Before that, however, I need to formally record and identify the evidence relied upon in the present applications.
Evidence relied upon
Argument upon the present applications proceeded on the basis of the Builder going first, seeking to articulate a basis upon which he contends both arbitral awards made against him should not be enforced pursuant to s 36 and, for essentially the same reasons, both awards ought be set aside pursuant to s 34 of the CA Act. To that end, the Builder relied upon two affidavits filed by him in ARB 14 of 2018. The first of the affidavits of Mr Cvetan Mladenovski was sworn 14 November 2018, comprising some 700 pages. The second was sworn 20 November 2018, comprising 93 pages.
In addition, the Builder relied on an affidavit sworn 14 November 2015 filed in ARB 13 of 2018, made by his former de facto partner, Ms Dorina Ungurean. Ms Ungurean was the Builder's administrative assistant until lunch on day four during the four day arbitration in question ‑ at which time her role became more significant, as I will explain later.
For the Owners, affidavits by lawyers Mr Matthew Alexander Cornish, affirmed 17 October 2018, and Mr Thomas Henry Jacobs, sworn 30 November 2018, filed in ARB 13 of 2018, were read and relied upon.
There was no objection to the use of any of the material in all these affidavits, although some content was plainly very much at the margins in terms of overall evidentiary admissibility. There was no cross‑examination of any deponent on the affidavits as read and received. In the end, however, the affidavits were left for the court to assess on a relevance and relative weight basis.
The arbitration and awards
It is now opportune to provide a brief chronological overview of the underlying factual position leading to what turned out of be a four day arbitral hearing convened before Mr Alan V Riley as arbitrator in May and June 2018 - and now the subject of the two applications presently before the court.
Mr Riley (who I will refer to as 'the arbitrator') was nominated to be these parties' arbitrator by the President of the Master Builders' Association (the MBA), on 11 July 2016. Following various preliminary conferences, the arbitrator conducted the arbitral hearings. The arbitration was commenced by the Builder against the Owners claiming moneys due pursuant to progress payment claims. But a counterclaim was later filed by the Owners against the Builder, essentially on the basis of claiming back alleged overpayments to the Builder.
Hearings before the arbitrator were first conducted on 25 and then 30 May 2018. There followed a break until a further two concluding days of hearings across 11 and 12 June 2018 respectively. There followed an opportunity to the parties for written closing submissions that the Owners took up, but the Builder did not.
In the end, the Builder was assessed by the arbitrator to have wholly failed upon his claim for moneys claimed as allegedly due pursuant to progress payment claims issued to the Owners. By some contrast, the Owners were successful on their counterclaim against the Builder, ultimately obtaining an award to the effect that they be repaid an amount of $103,560.43, inclusive of GST. The arbitrator duly awarded interest against the Builder, in the amount of $17,636.50 on the award favouring the Owners on their successful counterclaim.
Significantly, the arbitrator also awarded the costs of the arbitration to the Owners and, somewhat unusually, by the final arbitral award, issued an order for indemnity costs of the proceedings against the Builder. Those arbitral costs, as assessed by the arbitrator, amounted to $230,319.63, inclusive of GST. That amount of legal costs, viewed in proportion to the sums as claimed and ultimately awarded, illustrates the wholly disproportionate uneconomic character of the arbitral proceedings and now, these applications.
Presently, it is the wholly unsuccessful (at the arbitration) Builder who seeks to set aside both the partial final award against him of 10 September 2018 and also the final award of 6 October 2018.
Some chronological background to the dispute
What follows below appear to be essentially uncontroversial facts I have extracted from the affidavit materials read for the purposes of the present cross‑application.
The Builder and the Owners appear to have been known to each other through the Macedonian community and mutual activities surrounding the Macedonian Orthodox Church in Western Australia.
In January 2014, the Owners and Builder entered a lump sum contract for the construction of a two-storey residential dwelling by the Builder for the Owners at 15 McCoy Lane in Dianella, Western Australia. Subsequently, on 23 April 2014, they consensually replaced that first agreement with a new cost plus contract ('the cost plus contract').
In May 2014, construction work was begun by the Builder at the Dianella building site. There appears to have been no major issues arising between the parties for approximately one year or so. During this time the Builder rendered multiple progress payment invoices to the Owners and they would appear to have been paid uncontroversially.
On 24 August 2015, the Builder issued to the Owners what was his 19th invoice (referred to as MSPPR19) in the amount of $122,547, inclusive of GST. There is an issue about when the invoice was actually served on the Owners, notwithstanding its face date. In any event, payment was ultimately disputed by the Owners and was never made. According to the face of MSPPR19, it was due for payment on 7 September 2015. The invoice itself was a one line document simply claiming the above stated amount from the Owners. The invoice did not provide any explanation in relation to how the claimed amount was arrived at. In particular, it did not (fatally for it) meet the detail requirements stipulated by the cost plus contract under cl 23(b) - which required that any claim for payment submitted to the Owners by the Builder show a number of details and, importantly, under cl 23(b)(i), a schedule of the Actual Cost items for which the Builder claimed payment. The term 'Actual Cost' (of the Works) is defined under appendix 1 item 7(a), on an inclusive basis - by reference to some 21 different potential charges, costs or expenditures. Item 7(b) then identifies by way of exclusion the various items which do not fall within the Actual Cost of the Works (such as general office overheads -see item 7(b)(i)).
In addition to the Actual Cost of the Works, the express remuneration arrangements as agreed between the parties under their cost plus contract allowed for a Builder's Fee (inclusive of GST). This was, under appendix 1 item 8, stipulated as 11% of the Actual Cost of the Works. [The parties' cost plus contract appears to be a pro forma MBA 2014 document containing boilerplate conditions of contract.]
On 13 November 2015, the Builder issued a further invoice to the Owners. This also became the subject of a claim within the arbitration. This is invoice MSPGSTADJ-1, in a relatively small amount, contextually, claiming $14,653.13 to be due to be payable on 27 November 2015. This invoice was also not paid by the Owners. Ultimately, it became a component of the larger overall money claim as pursued by the Builder in the arbitration against the owners.
On 18 November 2015, the Builder purportedly gave notice of his future intention to suspend works at the Dianella building site by reason of the Owners' asserted wrongful non‑payment of invoice MSPPR19. Under cl 19 of the cost plus contract, the Builder was entitled to suspend works and to give notice of that suspension to the Owners if there was any ongoing default by the Owners. The Builder was also entitled to be paid any loss and damage arising from any suspension of the works. Hence, on 18 November 2015, the Builder was then giving notice of an intention to invoke that suspension clause. But his suspension stance was strongly disputed by the Owners, who contended they then owed him nothing more at all.
On 1 December 2015, the Builder issued the threatened notice of suspension. However, the Owners again disputed the Builder's entitlement to take that step - on the basis that no moneys were then properly payable to the Builder on their part in respect of MSPPR19. That invoice, they argued, had been wrongly issued or, in any event, had not been given in accord with the required format as stipulated under cl 23(b) in order for a valid progress payment claim to be made.
During January 2016, the Owners were contending the Builder had wrongly suspended works at the building site and that this constituted a repudiatory breach by the Builder of the cost plus contract. Under cl 20(a)(iii) of the cost plus contract, the Owners were entitled to terminate their agreement with the Builder for circumstances where the Builder defaulted by wrongly suspending the carrying out of works before practical completion without reasonable cause. In the event of a valid Owners termination, the Owners were then entitled, pursuant to cl 20(b), to engage another builder to finish the incomplete works.
In January 2016, the Builder issued his own notice of contractual termination to the Owners. This was on the basis that the Owners' actions amounted to a repudiation of the cost plus contract, which repudiation the Builder now said that he accepted.
So, as at 30 August 2016, both the Owners and the Builder were contending that their cost plus contract had been ended (terminated) by reason of the essential or fundamental repudiatory breach of the other. The Builder sought to pursue a claim for payment in respect of the two invoices (MSPPR19 and MSPGSTADJ-1) together with his claims for consequential damages and lost profits.
By cl 29, the cost plus contract contained an arbitration clause for the parties, towards effecting a settlement of disputes. By cl 29(c) it was provided that an unresolved dispute or difference between the parties, unless settled, could be submitted for resolution by reference to arbitration and that if the parties could not agree upon an arbitrator, then either the President of the MBA or the President's nominee would be the arbitrator.
For present circumstances, it was the Builder who sought the arbitration. However, as explained, the Owners subsequently counterclaimed against the Builder for alleged overpayment of moneys to him under previously paid out progress claims.
The arbitrator duly convened preliminary conferences between the parties and there followed some interlocutory hearings prior to the commencement of the arbitration hearings.
Although legally represented during the early phases of the preliminary conferences, the Builder, by the time of the hearings, which were originally scheduled for May 2018, was legally unrepresented. There is no suggestion the Builder was unable to afford legal representation at the time.
Arbitration hearings then proceeded across 25 and 30 May 2018 and then on 11 and 12 June 2018.
After the last hearing day (the events of which are significant and which I will discuss at greater length later in the reasons) some directions were issued by the arbitrator to allow the parties to provide written closing submissions.
As will be seen, day four of the arbitration on 12 June 2018 had eventually concluded by the completing of the receipt of the in‑person evidence of the Owners' expert quantity surveyor, Mr Li.
There had not, as matters unfolded that day, been a sufficient opportunity on day four for the parties to make oral closing submissions at that time - given the events which arose. Hence, directions issued by the arbitrator that day allowed for an exchange of written closing submissions. However, in the end, the Builder did not provide his written closing submissions as alleged by the arbitrator, even within the subsequently extended time limit.
Consequently, the arbitrator ultimately declined to consider the Builder's written closing submissions once eventually received on the basis that they were filed out of time. The default period appears to have been in the magnitude of approximately two or so days by the Builder. But a refusal by the arbitrator to consider the Builder's late written closing submissions is not something that is complained about on the present applications by the Builder.
The arbitrator duly issued a partial final award on 10 September 2018, dismissing the Builder's claim and, as I have mentioned, further finding for the Owners on their counterclaim in the amount of $103,560.43, inclusive of GST, together with interest and costs.
The partial final award of 10 September 2018 dealt only with issues of liability. The ensuing final award of 6 October 2018 dealt with issues of interest and costs.
As I have also mentioned, somewhat extraordinarily, the arbitrator ultimately ordered that the Builder pay the Owners' legal costs on a full indemnity basis amounting to $230,319.63. That was an amount of costs that was in excess of double the amount as ultimately awarded to the Owners on their successful counterclaim.
By par 21 of his final orders, the arbitrator ordered all amounts which he had awarded to the Owners to be paid by the Builder, together with interest at the amount of 6% and by Monday, 15 October 2018.
The moneys so awarded were not and have not yet been paid by the Builder to date.
On 19 October 2018, the Owners commenced ARB 13 of 2018 seeking the enforcement in this court of the two awards in the total amount of $351,516.56. As noted, enforcement has been resisted by the Builder. Then, on 14 November 2018, the Builder commenced ARB 14 of 2018, seeking to set aside the two awards made against him.
I turn next to render some further observations concerning the basis upon which the learned arbitrator reached his award conclusions, essentially by rejecting and dismissing all of the Builder's claims against the Owners, but also finding for the Owners on their counterclaim against the Builder.
Before that, however, I need to mention some fundamental principles concerning the primacy of arbitral awards under the regime of the CA Act.
Arbitration principles
The CA Act seeks to give local effect to a model law which is the UNCITRAL Model Law on International Commercial Arbitration (adopted by the United Nations Commission on International Trade Law on 21 June 1985, with amendments adopted by the Commission in 2006) so as to be as uniform as possible with the UNCITRAL Model Law - see s 1D of the CA Act.
The paramount object of the CA Act as stated by s 1C, is to:
(1)... facilitate the fair and final resolution of commercial disputes by impartial arbitral tribunals without unnecessary delay or expense.
Subsection (2) of s 1C provides that this paramount object is aimed to be achieved, amongst other things, by:
(b)providing arbitration procedures that enable commercial disputes to be resolved in a cost effective manner, informally and quickly.
By subsection (3) of s 1C, the CA Act is required to:
... be interpreted, and the functions of an arbitral tribunal must be exercised, so that (as far as practicable) the paramount object of the [CA Act] is achieved.
By s 1 of the CA Act, it is made applicable to domestic commercial arbitrations, as defined. There appears to be no dispute that the arbitration agreement underlying the current dispute renders it a domestic commercial arbitration in Australia.
Because of the underlying international model arbitration law and the uniformity that is strived for by the various States of Australia who, with the Commonwealth of Australia, are participating under such a regime, cases decided in other international jurisdictions but following the model law carry a greater than usual significance in this area -beyond the force they might otherwise carry in other areas of State domestic law.
To the end of recognising what are to be uniform internationally observed principles, it is insightful to mention at the outset an extract from the decision of the Singapore Court of Appeal in AKN v ALC [2015] SGCA 18. There, Menon CJ observed the underlying principle of minimal curial (ie, court) intervention towards arbitrations. At [37] the Chief Justice wrote:
A critical foundational principle in arbitration is that the parties choose their adjudicators. Central to this is the notion of party autonomy. Just as the parties enjoy many of the benefits of party autonomy, so too must they accept the consequences of the choices that they make. The courts do not and must not interfere in the merits of an arbitral award and, in the process, bail out parties who have made choices that they might come to regret, or offer them a second chance to canvass the merits of their respective cases. This important proscription is reflected in the policy of minimal curial intervention in arbitral proceedings, a mainstay of the Model Law and of the [International Arbitration Act of the Republic of Singapore. See Singapore, Cap 143A, 2002 Rev Ed)]. (my emphasis in bold)
In light of what are the Builder's presently expressed grievances to the effect he was not allowed to, or was unable to, present his case at the arbitration, or was otherwise denied natural justice (in terms of a personal absence due to ill health after lunch on day four) when more evidence was led by the Owners, and by being denied, he complains, an opportunity to personally cross‑examine that afternoon (including to cross‑examine personally the Owners' expert quantity surveyor, Mr Li), the further observations by Menon CJ upon the topic of natural justice within arbitrations, presents to me as particularly apposite. The Singaporean Chief Justice had proceeded to say at [38]:
In particular, there is no right of appeal from arbitral awards. That is not to say that the courts can never intervene. However the grounds for curial intervention are narrowly circumscribed, and generally concern process failures that are unfair and prejudice the parties or instances where the arbitral tribunal has made a decision that is beyond the scope of the arbitration agreement. It follows that, from the court's perspective, the parties to an arbitration do not have a right to a 'correct' decision from the arbitral tribunal that can be vindicated by the court. Instead, they only have a right to a decision that is within the ambit of their consent to have their dispute arbitrated, and that is arrived at following a fair process.
The sentiments as expressed in [37] and [38] from the reasons of Menon CJ cited above find a statutory local resonance in s 18, at the commencement of Pt 5 of the CA Act. This provision (by reference to a comparison with Model Law article 18 as regards a stipulated model law need for equal treatment of parties in arbitral proceedings) provides in the following terms:
The parties must be treated with equality and each party must be given a reasonable opportunity of presenting the party's case. (my emphasis in bold)
I also observe that in s 18 the word 'opportunity' is seen qualified by the adjective 'reasonable'. In other words, the opportunity to present a party's case at an arbitration is clearly not unqualified, open ended or unlimited. Necessarily then, what will amount to a 'reasonable' opportunity to present a party's case must depend upon the invariably unique presenting circumstances of each and every distinct arbitral dispute.
Natural justice under public policy in arbitrations
As regards the Builder's alleged denial of natural justice and procedural fairness expressed grievances being advanced herein - as a basis to contend a violation of the public policy of the jurisdiction concerned (ie, of the State of Western Australia) - some considerable level of curial caution, in my view, is called for as regards assessing what is the true underlying subject matter of an alleged denial of natural justice or procedural fairness deficiencies, said to have undermined an arbitration result.
Again in this realm, observations by Menon CJ made in AKN v ALC are a useful commencing platform. At [39] the learned Chief Justice had said:
In the light of their limited role in arbitral proceedings, the courts must resist the temptation to engage with what is substantially an appeal on the legal merits of an arbitral award, but which, through the ingenuity of counsel, may be disguised and presented as a challenge to process failures during the arbitration. A prime example of this would be a challenge based on an alleged breach of natural justice. When examining such a challenge, it is important that the court assess the real nature of the complaint. Among the arguments commonly raised in support of breach of natural justice challenges are these:
(a)that the arbitral tribunal misunderstood the case presented and so did not apply its mind to the actual case of the aggrieved party;
(b)that the arbitral tribunal did not mention the arguments raised by the aggrieved party and so must have failed to consider the latter's actual case; and
(c)that the arbitral tribunal must have overlooked a part of the aggrieved party's case because it did not engage with the merits of that part of the latter's case.
Although such arguments may be commonly raised, more often than not they do not, in fact, amount to breaches of natural justice.
Towards this same natural justice grievance violating public policy arena, local Australian case authorities have also recognised the level of caution which needs to be applied in evaluating so-called natural justice or procedural fairness arguments - fashioned to pass through the narrow dimensions of a local public policy conflict gateway - as recognised by the model laws, in particular for WA, by s 34(2)(b)(ii) and s 36(1)(b)(ii) of the CA Act. I refer, for instance, to the observations of Croft J in the Supreme Court of Victoria towards natural justice considerations supposedly intersecting against the model law in Amasya Enterprises Pty Ltd v Asta Developments (Aust) Pty Ltd [2016] VSC 32 at [42] - [43]:
As is clear from this passage, art 18 of the Model Law - and, by implication, s 18 of the Act - does not invoke the principles of natural justice or procedural fairness developed in, for example, administrative law, or other common principles not developed in the context of the Model Law. Such common law principles undoubtedly flow from the same jurisprudential source as art 18 of the Model Law in that they are, fundamentally, concerned with fairness, equality and due process. Indeed, there are many circumstances where these principles may overlap with the requirements of art 18 and may produce similar outcomes. However, ultimately, the requirement of fairness and equality of treatment of the parties in arbitration is distinct from, and often more straightforward in its application than the position developed by the common law in various contexts.
The relevant test is to be drawn from the words of s 18 of the Act itself and may be stated as follows: 'Were the parties treated with equality and was each party given a reasonable opportunity of presenting the party's case?' As is apparent from the reasons that follow, a failure to recognise and apply this test may result in the adoption of an impermissible judicial approach to the question of whether an objecting party was denied procedural fairness or natural justice in breach of the Act. Like any other provision of the Act which mirrors the Model Law, s 18 must not be viewed 'through the prism of principles and doctrines not found in the Model Law or the New York Convention, and which may be peculiar to a particular domestic jurisdiction.' The temptation to approach the application of the Act in this way - the temptation of 'domesticity' - must be resisted in order to promote uniformity between the application of the Act and the application of the Model Law as required by s 2A of the Act and as emphasised by the Court of Appeal in Subway Systems Australia Pty Ltd v Ireland. (footnotes omitted)
Such cautions are particularly apposite, as will be seen, within the present context of what is a relatively small monetary scale residential construction dwelling payment/damages dispute - measured against the legal costs of arbitrating, and then litigating over, as the magnitude of the indemnity costs award issued against the Builder by the arbitrator under his final award would numerically exemplifies.
More Australian domestic arbitration case law
Apart from the observations of Menon CJ in the Singapore Court of Appeal in the decision of AKN v ALC, to which I have now referred, there are a number of Australian authorities which I would note by way of assistance towards evaluating the present circumstances. Three of the decisions were by Croft J in the Arbitration List of the Supreme Court of Victoria. I have already mentioned one. I refer to his Honour's decisions in Cameron Australasia Pty Ltd v AED Oil Ltd [2015] VSC 163 particularly at [23]; Amaysa Enterprises Pty Ltd v Asta Developments (Aust) Pty Ltd at [26], [40] - [48] and [50]; and Indian Farmers Fertiliser Cooperative Ltd v Gutnick [2015] VSC 724; (2015) 304 FLR 199 at [13] - [14], [17] - [18] and [20] - [22].
Supporting this court's undoubted residual discretion not to set aside an award, even if, say, the Builder here could establish, for instance, a denial of a reasonable opportunity to present his case, I mention observations by Croft J in Cameron Australasia Pty Ltd v AED Oil Ltd at [23], particularly in reference to his Honour's discussion of Hong Kong and Singaporean decisions, namely, Grand Pacific Holdings Ltd v Pacific China Holdings Ltd (in liq)(No 1) [2012] 4 HKLRD 1 [101], [106]; Triulzi Cesare SRL v Xinyi Group (Glass) Co Ltd [2015] 1 SLR 114, [60] - [64], [118] - [125] and [134].
As regards the public policy ground for refusing enforcement, I mention further Croft J's observations in Indian Farmers Fertliser Cooperative Ltd v Gutnick, commencing at [25] of those reasons and particularly at [32], in reference to applying and following observations of the Full Federal Court (Allsop CJ, Middleton & Foster JJ) in TCL Air Conditioner (Zhongshan) Company Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361 [77], noting also the earlier decision on appeal to the High Court in TCL Air Conditioner (Zhongshan) Company Ltd v Judges of the Federal Court of Australia (2013) 251 CLR 533.
As regards the requirement to assess any alleged unfairness to a party in terms of presenting their case in overall context see TCL Air Conditioner (Zhongshan) Company Ltd v Castel Electronics Pty Ltd [2014] FCAFC 83; (2014) 311 ALR 387 at [86].
A synthesis of all these decisions as regards the need for curial restraint against attempts to disturb or set aside the force of an an arbitral award by a disgruntled loser party by invoking an exception against the policy objective of minimal curial intervention can be shortly stated. The current early 21st Century phenomenon of deploying lofty, virtue laden (but substantially porous) words and phrases as 'Trojan Horses' to mask what are really just private agendas, needs to be called out. Only by a cool, dispassionate and intellectual analysis of assembled facts sustaining the underlying grievance may the law in this and other areas be properly administered. The seductive, but obfuscatory, nobility of a virtuous phrase - like 'natural justice' - always needs to be intellectually deconstructed towards the exposing of what are the true underlying elements of the grievance. From there, the unvarnished underlying facts can then be rationally assembled, weighed and evaluated - without the diverting distraction of misty sentimentality.
I turn now to discuss in more detail the arbitrator's reasons underlying his arbitral awards that are sought to be enforced by the Owners, but are sought to be set aside by the Builder.
The two arbitral awards of the arbitrator
The partial award of 10 September 2018
Under the partial final award of 10 September 2018, the Builder's claim pressing for payment of, essentially, two invoices plus further moneys, was dismissed by the arbitrator on the basis that it was essentially hopeless. That fatal conclusion arose from a finding that the claim for payment was conceptually inconsistent with the cost plus contract as entered by the parties. That was in circumstances where it was accepted that the Builder had not in fact actually incurred the costs he was asking the Owners to be paid for, in effect, in advance.
The Builder had also made a further claim in respect of loss and damage arising out of the suspension and termination of the works - in the amount of $58,408.59. The Builder was also claiming his (presumably) 11% builder's fee as well. There was also a claim by the Builder for loss of bargain damages, in an amount of $38,170.38. Derivatively, this also had failed since the main payment claim had failed and it necessarily followed that the Builder was assessed to have held no legitimate basis to suspend the contract works, or to terminate.
The controversial invoice of the Builder, MSPPR19 of 24 August 2015, was found to have not actually been submitted to the Owners until 14 September 2015.
As was (correctly) observed by the arbitrator, cl 23 of the contract requires all payment claims to show on their face a number of particulars and items. It was patently clear MSPPR19 failed to satisfy those requirements of cl 23. No particulars of work done were ever provided to the Owners. No evidence of any costs actually incurred by the claimant Builder was given to the Owners. The arbitrator consequently had found, having regard to subclause 20(a)(iii) of the parties' cost plus contract, that the Owners were contractually entitled to terminate as and when they did. That result was correct and almost self‑evident.
As seen, the arbitrated dispute between the parties extended further to include the counterclaim brought by the Owners against the Builder. They were contending that they had been either charged for work that had not been done by the Builder in respect of prior progress payments or, indeed, that they had been overcharged, or had even been double charged, in respect of the Builder's progress claims and invoices that they had already paid. The Owners' cross‑claim was supported by an expert report about which the arbitrator had said at par 15:
The Respondent's claim for a refund is supported by an independent expert's report which was provided to [the Builder] in February 2018.
Some minor revisions were made to that expert report by the Owners' expert witness, quantity surveyor Mr Li, at the hearing. That was on day four after the lunch break. But those modifications had actually favoured the Builder, numerically. Objections to Mr Li's late adjustments were therefore not pursued, and properly so.
The Builder, acting for himself as an arbitral claimant, had gone first at the hearing. He had attempted to lead evidence from his own expert witness at the hearing, a Mr Neil Butler. The Builder also led evidence from other witnesses, including a Mr Kevin Misson, an electrician, and a Mr Alan Woodward, who was described as a building supervisor (in the employ of the Builder).
The counterclaim pursued by the Owners as amended had been a claim for $117,456.36. But that sum came to be reduced by an amount of $13,895.93. That was due to a finding by the arbitrator that the Builder had not overcharged the Owners for brickwork as claimed by the Owners and under Mr Li's report. By his finding (which the Owners do not challenge before me - albeit they assert it was reached in error), the arbitrator made an adjustment to the Owners' overpayment claim, reducing it by the $13,895.93 amount. That still left an overpayment cross‑claim of $103,560.43 inclusive of GST (claimed back from the total progress amount that the Owners had paid to that point under their progress invoices from time to time of $764,512.51 inclusive of GST).
The Owners had also claimed $10,658.16 for administration costs. That claim was disallowed by the arbitrator.
As we will see, the real forensic difficulty for the Builder at the hearing, encountered by him in resisting the Owners' counterclaim (grounded on Mr Li's expert report), was that the expert evidence the Builder had called in his case from Mr Butler was less than adequate. As regards the Builder's expert evidence, the arbitrator had said at par 16 that such evidence had been 'vague, unstructured and totally unconvincing'.
From that finding, the abiding forensic problem for the Builder was that the rival experts Mr Li and Mr Butler, whose evidence was pivotal towards the Owners' counterclaim, had been like 'ships in the night'.
The final award of 6 October 2018
The final award of 6 October 2018 dealt with the subject matters of interest and costs. Given its somewhat extraordinary content by ultimately awarding indemnity costs against the Builder, I note its following components.
The arbitrator said this at pars 5 to 8:
As stated in my partial final award, the genesis of the dispute that has led to this arbitration is the Claimant's payment claim MSPPR19, submitted in September 2015, which the Respondents rightly refuse to pay. As a result of that refusal, the Claimant wrongly suspended the works and unsuccessfully sought damages in this arbitration.
When payment claim MSPPR19 was first produced in evidence at the hearing, it was immediately evident to me (and would have been to any person with even the most basic understanding of contract law) that something was very seriously wrong with it. It was merely a single sheet of paper seeking payment of $122,547.00 including GST without any documentation or data in support. In the context of a cost plus contract in which costs incurred by the claimant needed to be evidenced, detailed and substantiated, it was obvious that the payment claim in question was wholly defective in its form.
Further, when correspondence relating to payment claim MSPPR19 was brought into evidence, it very quickly became clear that the Claimant was seeking payment at the time for work that had not been done and where no costs had been incurred, such that it was defective not only in form but also in substance. In short, the Claimant's mind set and conduct in the submission of the payment claim were directly at odds with the terms of the contract and with the very essence of a cost-plus arrangement.
Payment claim MSPPR19 takes centre stage in the Claimant's statement of claim and, as I have said, it precipitated the entire arbitral process in this case. The Claimant was legally represented when he formulated his statement of claim and it remains a source of amazement to me that the Claimant was advised to proceed with arbitration from such an obviously flawed platform. The fact that the Claimant's statement of claim in respect of payment claim MSPPR19 also completely misrepresents the facts and the date upon which it was sent to the Respondents merely serves to compound my amazement and to confirm for me that the Claimant's case was ill‑conceived and ill prepared from the very outset.
At par 12, awarding indemnity costs against the Builder the arbitrator said further:
Put succinctly, the Claimant disregarded the contract and the law before and when he made his claim. He also disregarded the fact that he had made excessive and unsubstantiated monetary claims and had already been paid an amount far greater than the costs he had actually incurred, a fact that he should have known and which would have been readily demonstrable by the most basic accounting. The Respondents should never have been forced into this arbitration on the basis that they have been and should be compensated accordingly.
From that rather unhealthy base, the Builder's position on the present applications is to be viewed.
The Builder's three grounds seeking to resist enforcement and to set aside the awards
I now turn back briefly to elaborate upon the grounds articulated by the Builder in seeking to set aside the awards against him.
Ground 1
The first of the grounds contends there was an error of law made by the arbitrator in refusing to allow the Builder to give evidence at the arbitration hearing. That assertion needs some considerable factual clarification.
It will be remembered the Builder represented himself at that hearing. That was unwise. He was opposed by the Owners, who were legally represented by counsel and instructing solicitors. It is clear that the Builder was heavily outgunned in this contest, even though the arbitrator did his best to assist the Builder where possible and within the appropriate bounds of his role.
For the purposes of the present applications I was provided a copy of the entire 395 pages of transcript of the four days of the arbitral hearing across two days of May and then two more days of June 2018 (see affidavit of Cvetan Mladenovski swon 14 November 2018, CM19, pages 239 - 634 as paginated in that affidavit. I use the paginations in the affidavit when referring to transcript page numbers). The transcript had been recorded and transcribed by the Owners' solicitors. The nature of the so termed natural justice grievances as claimed by the Builder have (regrettably and uneconomically) demanded my close scrutiny of the entirety of the unedifying four days worth of transcript.
As regards ground 1's asserted denial of an opportunity to the Builder to present his case, in particular, by not allowing the Builder to give evidence, it seems clear that the arbitration commenced on day one on the express basis that the Builder (representing himself, with administrative assistance by Ms Ungurean, his former de facto partner) was seeking to advance claims to money and to also resist the counterclaim against him - on the basis that the Builder would not be giving evidence himself.
The Builder had told the arbitrator on day one that he would be calling a number of witnesses (including an electrician and an expert). But he had also told the arbitrator in very clear terms on day one that he personally would not be giving any evidence - informing the arbitrator in terms, '... but I am not a witness in this case, sir' (see ts 241. Note: The Builder is referred to under the acronym CM in the transcript).
At that point, at day one, the Builder was apparently also seeking to express an objection against the second co-Owner plaintiff, Ms Jasminka Spaseska, not being a witness to give evidence at the arbitration. The witnesses as foreshadowed to be called for the Owners at day one were only Mr Spaseski, followed by the Owners' expert quantity surveyor, Mr Li. That remained the case. It was not until day two that the Builder's position upon his own evidence appeared to move somewhat (see ts 389 - 391).
Day one of the arbitration itself needed to be adjourned early, at lunch. That was because the Builder had not brought with him then any of his proposed witnesses for that day. Consequently, half a day's hearing time was lost. Had the Builder sought to personally give evidence, it would normally have been appropriate for him (albeit this, in the end, was a procedural matter for the the arbitrator to determine) as the moving claimant party (plaintiff) to adduce his evidence first, that is, before his other witnesses - absent some good reason to the contrary.
But the Builder's position, at least on day one, made clear by him, was to the effect that he would not be a witness. Had he been a witness, then the wasted afternoon of day one could have been utilised for the purpose of taking his evidence, rather than it being lost as it was.
On day two, however, the Builder's position looks to have shifted -towards that of what was then being expressed to be something of his 'offer' to give evidence, advanced under some sort of (misguided) trade‑off context. The position then altered again in the subsequent hearing days, at which point the Builder was foreshadowing seeking to recall two of his witnesses (see ts 426 - 429). Unsurprisingly, objection was taken to that recalling course by counsel for the Owners.
By day four of the arbitration the Builder was seeking to change position again and then seeking to give some rather unspecified evidence in certain areas (see ts 562). However, this new stance after his case had been closed appears to have been a response to a slowly dawning realisation that, by that time, his whole case, particularly his primary case for payment, was going very badly.
It will be also remembered that as regards the Builder's claim for payment of a second invoice for some $14,653.13 (MSPGSTADJ-1), the arbitrator ultimately found by his partial final award of 10 September 2018 that (at par 7):
The Claimant has put before me no evidence whatsoever in support of claim MSPGSTADJ-1: in fact, the claim itself was never put into evidence. As a result, the Claimant has failed completely to discharge his burden of proof in relation to the claim and the claim fails.
The arbitration had proceeded on the basis of verbal (viva voce) evidence from the lay witnesses - without any prior exchange of witness statements or even of witness summaries.
A change of position by the Builder as regards submitting his own evidence came very late. It was then for the arbitrator to evaluate and decide on as a matter of procedure within the arbitration as a whole. A resulting decision against allowing the Builder to make a late change of position does not meet a threshold for curial intervention, on a basis that the Builder was not allowed a reasonable opportunity to present his case. The Builder is responsible for this position, nobody else.
By my assessment, the grievance does not meet the circumstances of a denial to him of a 'reasonable' opportunity to present his case by s 18 (and founded upon model law article 18) of the CA Act.
Assessed within an overall context, even making a full allowance for the fact the Builder was legally unrepresented and was accordingly heavily outmatched legally in the arbitration, he was still afforded, by my assessment here, a more than reasonable opportunity to present his case. On my assessment of the transcript, this arbitrator was more than generous - indeed, generous to a fault - in allowing what looks to be something of a shambolic presentation of the Builder's case to unfold in wholly uneconomic underlying monetary circumstances. No one is to blame for this but the Builder himself.
Even more fundamentally, however, as regards the Builder's primary claim seeking payment in respect of two invoices and then, for consequential damages for losses of profit arising from a wrongful suspension of works, this was a case where it is clear that any hypothesised receipt of some verbal evidence by the Builder (always of an unspecified character, even at the applications heard before me) could not have made a jot of difference to the end outcome.
Nothing that might have hypothetically emerged out of the mouth of this Builder, had he counter-factually been allowed to give (unspecified) evidence, can be seen to have logically countered and addressed what was a fundamental conceptual deficiency in his case. That case was grounded upon claims for payment as a progress claim rendered in circumstances where at the time invoice MSPPR19 was issued, first, the actual costs claimed had not then factually been incurred by the Builder. Second, even if they had been, the progress claims did not meet the formal requirements as required under cl 23(b) of the cost plus contract in order to establish a proper basis to claim. Such grave deficiencies were always terminal in law to this Builder's money claims.
It is unhelpful and unpersuasive to hypothesise after the event over some non‑specific evidence from the Builder as regards such gross deficiencies in his claims for payment. They in turn led to his wrongful suspension of the works and then, worse for him, to the Owners lawfully terminating the performance of the contract by reason of the Builder's wrongful breach and his contractual repudiation.
As I have said, no attempt was made at the hearing before me to identify for me with any specificity the character of what the hypothetical extra evidence could have been given by the Builder to remedy such fatal defects. I can see none. This is because that task is impossible for the Builder on these issues and this is, or should be, self‑evident.
Approaching an application to set aside the awards only at a theoretical level of a complaint over the arbitrator not allowing the Builder to give further evidence in his case without identifying the nature and character of such counter factual evidence from him is unhelpful and ultimately unpersuasive on ground 1.
Similarly, as regards the Owners' successful counterclaim against the Builder, that same causation obstacle arises (ie, what difference could it possibly make to the outcome).
In the area of the counterclaim, a massive underlying forensic problem for the Builder, as the arbitrator's reasons display, was that the expert evidence the Builder led first from his own expert, Mr Neil Butler, had not sought to engage against Mr Li's (the Owners' quantity surveyor) report exchanged in February 2018. The Owners engaged Mr Li (who relevantly, was Melbourne based) to provide the expert report and to attend at the arbitration. Mr Li ultimately attended on the afternoon of day four to adduce his report evidence and be cross-examined.
Even if the Builder had been present on that afternoon of day four to personally cross‑examine Mr Li (as I explain later, he was absent due to ill health, having been taken to hospital that afternoon), it remains the position that no sufficient basis has been demonstrated to me to indicate that, viewed from a causative perspective, this would have made a jot of difference whatsoever to undermine the adverse outcome that ultimately eventuated for the builder on the counterclaim, as I shall outline.
It is necessary to recall a portion of the arbitrator's partial final decision reasons of 10 September 2018 concerning the counterclaim. The arbitrator had said at par 16:
During the presentation of his own case, the Claimant [ie, the Builder] attempted to lead evidence through his own independent expert concerning the Claimant's progress claims but such evidence was vague, unstructured and totally unconvincing. Neither the Claimant nor his expert witness took the opportunity to challenge the observations, opinions and calculations made by the Respondents' expert and the Claimant's expert made no attempt at the hearing to proffer a critique of the Respondents' expert report. In short, the Claimant squandered any and every opportunity to refute the Respondents' claim both in the months prior to, and at, the hearing.
The arbitrator continued at par 18:
The cost evidence led by the Claimant through his expert witness was formless and lacked direction, as I have said. Importantly, it made no conclusion and did nothing to challenge the Respondents' claim. Most surprisingly and importantly, the Claimant's expert admitted that he had not considered the terms and conditions of the Contract and it is impossible to assess the validity of payment claims without considering the relevant contract provisions. I therefore give no weight to the costs evidence produced by the Claimant.
Correspondingly, the arbitrator, as was fully open for him, largely accepted most of the expert quantity surveyor evidence as adduced by the Owners via Mr Li. As to this evidence, the arbitrator said at par 19:
I find the costs evidence led by the Respondents through their expert witness to be clear, logical and conclusive subject only to the matter of brickwork costs ...
As regards the ultimately successful Owners' counterclaim, viewed again from a causation perspective, nothing has been pointed to as regards some further hypothetical extra evidence by the Builder - which might potentially have made a difference to the eventual adverse outcome here for the Builder. On that basis, ground 1 goes nowhere. It must be dismissed.
I should also note that a legal submission was put to me on behalf of the Builder to the effect that it was not necessary in present circumstances for the Builder, as regards this ground (and, indeed, on all grounds) to address their potential causative significance as challenger. In other words, it was contended that all that was required was for it to be established that the Builder had been wrongly denied a reasonable opportunity to give evidence (whatever that might have been). The submission put that if this position was established that was enough to command a result that the entirety of both arbitral awards should be set aside or not enforced. The submission is wrong. I reject the contention as lacking in sense or juridical foundation. The case authorities to which I referred earlier also indicate that the proposition is contextually misconceived. As a matter of discretion, absent the causation question being confronted and satisfactorily addressed, I would not set aside these awards even if some legitimate underlying problem had been sustained. In my view, until the question 'what difference would it have made?' is viably confronted and answered, there can be no legitimacy in such a theoretical grievance.
Grounds 2 and 3 of the set aside application of the Builder
Ground 2 complains that part of the arbitration was heard in the absence of the Builder (who was representing himself). Under ground 3 it is complained that the Builder was denied a fair opportunity to cross-examine the Owners' witnesses. Aggregated together, these grievances are said to constitute a denial of natural justice going against the public policy of the State of Western Australia.
The nature of the two grounds again demands a deeper factual understanding concerning the events of the afternoon of day four of the arbitral hearing. I turn to those events.
Just before lunch on day four the arbitrator properly enquired of the Builder how much longer he would be in his still ongoing cross‑examination of Mr Spaseski, the male co-Owner.
At that point, the Builder had been cross-examining Mr Spaseski since roughly about lunch on day three. (A perusal of days three and four of the transcript also suggests that the nature of the Builder's long cross‑examination of Mr Spaseski was largely ineffectual). A large measure of latitude was afforded to the Builder in his questions both by the arbitrator and by counsel for the Owners, indulging the non‑legally represented status of the Builder in the framing of his questions to Mr Spaseski.
It is clear a lot of time in the arbitration was unnecessarily wasted by an unduly long and unfocused cross-examination of Mr Spaseski. It was still unfinished at lunch on day four. At that time, Mr Li was waiting to give evidence, be cross‑examined and then return home to Melbourne. The time wasted in the cross-examination of Mr Spaseski was more particularly regrettable since, as regards counterclaim issues, because the independent expert quantity surveyor evidence of Mr Li was always going to be more forensically significant in the arbitration than the necessarily partisan position over counterclaim issues by Mr Spaseski as co-Owner.
In response to the arbitrator's pre-lunch day four enquiry, the Builder, who was then starting to feel unwell, indicated he would be perhaps about another hour that afternoon.
Over the day four lunch interval the symptoms of the Builder only worsened beyond what was a severe headache. Ms Ungurean became increasingly concerned about his health.
No one suggests the Builder was not genuinely suffering from adverse medical health symptoms at this time. Unfortunately for him, he had had a brain tumour removed some years before and was prone to headache symptoms, particularly under stress. One might have thought, however, that that was a particularly important reason for him not to be representing himself in a four day arbitration against a legally represented party. This contested arbitration presented as a perfect storm for a person vulnerable to stress.
At the resumption after lunch on day four, the Builder's health condition was worsening and it was at that point that the arbitrator offered, in effect, to take up and complete the cross-examination of Mr Spaseski (ts 556). Given his increasing indisposition, the Builder accepted that offer.
By reference to the transcript, it appears the Builder expressed himself as being satisfied with the questions the arbitrator put to Mr Spaseski over this period (see ts 562). Mr Spaseski's cross-examination was thus finally completed and he was then begun to be (briefly) re‑examined by his counsel.
At this point Ms Ungurean interjected (sounding distressed per the transcript). She said that she thought the Builder needed to be taken urgently to hospital for emergency treatment, given his deteriorating condition (ts 563). That was fully accepted by the arbitrator and counsel for the Owners. But the arbitrator indicated he still proposed to proceed in the absence of the Builder to continue the arbitration (ts 563 - 564).
There ensued a discussion, obviously in what were (understandably) distressed circumstances, whereby a loose arrangement of necessity appears then to have emerged. Ms Ungurean, who had been acting only as the Builder's administrative assistant to that point, after taking Mr Mladenovski to hospital for emergency assessment, was to return. She then, to the best of her ability, would conduct a cross‑examination of Mr Li. That, in the end, is what occurred.
During the absence of Ms Ungurean for about an hour and a half or so, Mr Spaseski's re-examination was completed by his counsel (see ts 564 - 570). Mr Li was then called. Mr Li had introduced his expert quantity surveyor report as his examination-in-chief with some elaboration. Some time was taken in this process with Mr Li making some amendments to his expert report (see ts 571 - 580). However, these changes were not extensive. They, in fact, had favoured the Builder in terms of reducing the amounts claimed back as moneys owed to the Owners by way of overpayment, in alleged circumstances of inappropriate or unsupportable aspects of progress claims fully paid by the Owners prior to receiving invoice MSPPR19.
Ms Ungurean duly returned from the hospital to the arbitration (ts 580). Some time was then taken to update her on what had occurred in her absence. The Builder had been admitted to Sir Charles Gairdner Hospital Emergency Department for treatment for his symptoms. Again I emphasise that no one suggests his adverse condition on day four was anything other than completely genuine.
Mr Li completed his evidence, explaining and elaborating upon some aspects of his slightly amended expert report. He was then cross‑examined by Ms Ungurean for approximately an hour and a half about aspects of his evidence. It was in this period that brickwork assessment issues were addressed, ultimately leading the arbitrator to reduce the amount of the counterclaim, as seen, to the extent of some $13,895.93: see par 21 of the partial final reasons of 10 September 2018.
On completion of Mr Li's evidence, he was released to enable him to catch his flight back to Melbourne that evening (see ts 629 - 630).
This part of the transcript would seem to indicate that Ms Ungurean, in contrast to the Builder, had conducted a relatively competent cross‑examination of Mr Li. She looks to have been complimented by the arbitrator for her cross‑examination efforts (ts 630 - 631).
However, it was now late on day four. There was no time left in these unforeseen and unusual circumstances to allow for closing submissions. The arbitrator indicated that his original intention had been to hear verbal closing submissions at the completion of the evidence. But now, in the circumstances, that was simply impossible. Consequently, directions were given for the parties to provide the arbitrator with their written closing submissions and a timetable to that end was ultimately issued (ts 632 - 633).
Three matters of importance emerge here in the context of the Builder's grounds 2 and 3 natural justice and violation of Western Australian public policy linked arguments.
First, the adverse health circumstances which unfortunately arose at and after lunch on day four of the arbitration were unforeseen and very regrettable. But they were not matters attributable in any way to the arbitrator or to the Owners or to their legal representatives. A key contention of the Builder, through counsel, at this application is that in the face of his ill health symptoms manifesting after lunch on day four, that even though it was never requested, that as a matter of fairness, the proceeding ought then to have been adjourned until the Builder's health had recovered and he was in a position to continue. It was also said that although Mr Li was based in Melbourne and had travelled to Western Australia to give evidence, that alternative adjournment arrangements could have been made for him to give that same evidence and to be cross-examined at a subsequent time over a video‑link by the Builder personally.
In essence, it is put on behalf of the Builder that an order for costs could have addressed any adverse outcomes arising by a unilateral adjournment at that point, which should have issued.
I cannot accept this argument of the Builder in a context of evaluating the progress of and the position this arbitration had reached at lunch on day four. The circumstances which had arisen then were unfortunate, but were nobody's fault.
Second, it is plain the arbitral proceedings were being recorded to be transcribed. A transcript was duly prepared and it was available for review by the Builder shortly after 12 June 2018. This was not a situation then where once the Builder had recovered from his adverse symptoms, as it appears he duly did, that there was no opportunity to fully appraise him about what had occurred in his absence. Further to that, other than for a period of about an hour and a half when she was absent, Ms Ungurean had been available to provide the Builder with a full report about what had occurred in his absence, including her own more than respectable efforts at cross-examining Mr Li.
However, as I have already indicated, the forensic scope for an effective cross-examination of Mr Li in these circumstances had been significantly undermined a lot earlier. This was due to the abiding underlying forensic problem which arose well before day four. This was because the Builder's expert, Mr Butler, by his own report had not sought to engage against Mr Li's report. Absent a rival expert to rival expert direct engagement over contentious counterclaim issues, the scope for a challenge against Mr Li in terms of his report was always narrow.
Third, the arbitrator, at the conclusion of proceedings, issued directions allowing the parties to provide him with written closing submissions addressing their respective cases by 19 June 2018.
In the end, as the events transpired, the Builder was about two days late in meeting an extended deadline set by the arbitrator for a receipt of his written closing submissions. The Builder's default in providing written closing arguments in accord with the arbitrator's timetable, as it had been extended by the arbitrator, resulted in a loss of that last opportunity to make submissions on the Builder's case by argument, not by further evidence.
The Builder sought to provide an explanation for this default predicated upon the asserted poisoning of two of his animals and the repercussions of that unfortunate incident, but the arbitrator would now allow a further extension. That was a procedural matter for the arbitrator to resolve, as he did.
Due to the lateness of their receipt, the arbitrator refused to consider the Builder's written submissions after they ultimately arrived.
That, in the circumstances, was again unfortunate, but it is not one of the grounds of grievance now asserted by the Builder on the present applications.
The loss of the opportunity to be heard through a receipt of written closing submissions bears significantly, in my view, against what are the now contended arguments of the Builder that he was denied natural justice - on a ground that he was not sufficiently able to present his case, to be present during all of the arbitration, to personally cross‑examine (further) Mr Spaseski (albeit he had cross‑examined him for almost a day) and to personally hear and to cross‑examine Mr Li.
Evaluations as regards grounds 2 and 3
In the first place, I am of the view that, assessed contextually, particularly by reference to s 18 of the CA Act and to the expressed need for arbitral parties to be treated with equality and given a reasonable opportunity of presenting their case - there was no such failure here as regards the Builder during this arbitration.
Remembering a paramount object of the CA Act as articulated under s 1C, in relation to a resolution of commercial disputes without unnecessary delay or expense, in a cost effective manner and informally and quickly, grounds 2 and 3 can be seen on their face to be tenuous grievances.
The grievance that the arbitration was completed in the absence of the Builder is only partially correct. The events of the afternoon of day four of the arbitration have now been discussed. There was, however, a further opportunity afforded for the Builder, after a review of the transcript of day four, to provide a written closing argument. By reason of his own issues, the Builder ultimately lost that opportunity to be heard further. The circumstances of his indisposition and a need for emergency treatment at hospital on the afternoon of day four were clearly regrettable. But it was not unreasonable or inappropriate, nor did it amount to a denial of natural justice or procedural fairness to the Builder, for the arbitration to continue and for the evidence from Mr Spaseski and Mr Li to be completed on that afternoon.
In all the circumstances, there was no denial of natural justice or procedural fairness at this arbitration towards the Builder on those grounds. Nor was the Builder denied a reasonable opportunity to present his case in all the same circumstances.
Here again, there is a second fundamental flaw from the perspective of resulting causation outcome, not addressed, as regards the adverse end result for the Builder. By my assessment, neither a hypothetical continued presence of the Builder over the afternoon of day four of the arbitration, nor his hypothetical further cross-examination of Mr Spaseski or of Mr Li, would or can be said to have likely resulted in different outcomes for those ultimately issued. Nothing suggests some overlooked factor or line of questioning that would have led to a different result on the unsuccessful defence of the Owners' counterclaims against him. Hence, even if there was some natural justice issue at the public policy concern threshold (which I would reject) then as a matter of discretion I would still not be persuaded that any such grievance would lead anywhere, sufficient to sustain a curial intervention.
It was suggested on behalf of the Builder that as a matter of law it is not necessary for the Builder to go that far, if he can point to a legitimate natural justice deficiency. I reject the submission. In the present unique circumstances, which include the relatively small economic scale for a domestic arbitration assessed in overall context commercially, its observed duration (four days), the way in which it was inefficiently conducted by the Builder up to lunch on day four, and the voluminous materials now put before this court (including four days of arbitration transcript), all these features together must dictate that the Builder's expressed grievances about a failure to enjoy further the ability to question witnesses can simply not be left as plenary denial grievances without more.
The 'more' that is required is to provide a reasonable basis to show that a particular line of cross‑examination questioning of Mr Li by the Builder might have stood some realistic prospect of achieving something - in contrast to a blatant lament simply about not being present on the afternoon of day four. Addressing that extra causative dimension has not even been attempted on behalf of the Builder. In my view, this counts heavily against the grounds 2 and 3 arguments that the Builder was denied a reasonable opportunity to present his case. At the end, I reject those grounds 2 and 3 arguments.
In the end then, none of the Builder's grounds are accepted.
End orders
In consequence then for ARB 13 of 2018, under the amended originating summons of the Owners, there should issue an order pursuant to s 35 of the CA Act that the partial final award of 10 September 2018 and the final award dated 6 October 2018 (before this court in the affidavit of Matthew Alexander Cornish of 17 October 2018, attachment 2, filed in ARB 13 of 2018) in the amount of $351,516.56, be enforced.
When moved, I would further order that judgment be entered for the Owners in ARB 13 of 2018 against the Builder in that proceeding in the sum of $351,516.56, together with interest on that amount calculated from 15 October 2018 at the rate of 6% per annum.
At that time, I would also order that the Builder should pay the Owners' taxed costs of the application in ARB 13 of 2018.
As regards ARB 14 of 2018, I would order, when moved, that the Builder's application be dismissed, with the Builder to pay the Owners' taxed costs of resisting that application. The two costs orders favouring the Owners should be taxed and assessed jointly as, in effect, costs of one application.
In short, I have concluded that there was no denial of natural justice or denial of procedural fairness by the arbitrator to the Builder in the underlying arbitral circumstances. Invoking the language of s 18 of the CA Act, there was no denial of any reasonable opportunity to the Builder to present his case in the arbitration. In any event, as a matter of discretion, motivated largely by the causative lacunae in the Builder's grievances as I have identified within these reasons, I would not, in any event, set aside the awards, or refuse to enforce them at the Owners' behest.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
DW
Associate to the Honourable Justice Martin5 MARCH 2019
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