State of New South Wales v Austeel Pty Limited

[2004] NSWSC 81

CITATION:	State of New South Wales v Austeel Pty Limited [2004] NSWSC 81
HEARING DATE(S):	23 February 2004
JUDGMENT DATE:	23 February 2004
JURISDICTION:	Equity Division Technology & Construction List
JUDGMENT OF:	Bergin J
DECISION:	Extension granted
CATCHWORDS:	Application pursuant to s.48 of the Commercial Arbitration Act 1984 (NSW) by plaintiff (respondent in arbitration) to extend certain times in arbitration clause in Agreement with defendant (claimant in arbitration) - Whether application involves the determinaion of a question of law - "undue hardship"- Whether in all the circumstances time should be extended.
LEGISLATION CITED:	Commercial Arbitration Act 1984
CASES CITED:	Haskins & Anor v Brae - Villa Homes Pty Ltd VSC, O'Bryan J 27 July 1995 Jennings v Credit Corp Australia Pty Ltd (2000) 48 NSWLR 709 Liberian Shipping Corporation v A. King & Sons Ltd [1967] 1 Lloyd's Rep 302 PMT Partners Pty Ltd v Australian National Parks and Wildlife Service (1995) 184 CLR 301 State of New South Wales v Austeel Pty Limited [2003] NSWSC 1077 State of New South Wales v Austeel Pty Limited [2003] NSWCA 392 Raguz v Sullivan (2000) 50 NSWLR 236 White v Overland and Anor [2001] FCA 1333
PARTIES :	State of New South Wales (Plaintiff) Austeel Pty Ltd (Defendant)
FILE NUMBER(S):	SC 55010/04
COUNSEL:	Mr J Sackar QC (Plaintiff) Mr M Holmes QC (Defendant)
SOLICITORS:	Freehills (Plaintiff) Kemp Strang (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
TECHNOLOGY & CONSTRUCTION LIST

BERGIN J

23 FEBRUARY 2003

55010/2004 STATE OF NEW SOUTH WALES V AUSTEEL PTY LIMITED

JUDGMENT

1 This is an urgent application pursuant to section 48 of the Commercial Arbitration Act 1984 (NSW) for extension of certain times in respect of an arbitration hearing due to commence on 26 February 2004 before a panel of three arbitrators, the last of whom was appointed on 12 February 2004. On 19 February 2004, Windeyer J, as Duty Judge in the Equity Division, granted the plaintiff leave to file a Summons in the Technology and Construction List returnable before me on Friday, 20 February 2004. On that day I gave directions and listed the matter for urgent final hearing before me today.

2 I should say that the reason this judgment is being given extempore is because the parties are obviously under pressure with the arbitration hearing being listed on Thursday and the parties need to know the result. The defendant requested that I provide my reasons this evening rather than announce the result and give reasons later.

Background

3 The plaintiff, State of New South Wales, and the defendant, Austeel Pty Limited, are parties to an agreement, the Austeel Agreement (the Agreement) entered into on 14 February 2001. The Agreement was amended by further agreement signed on 12 July 2002 and by further agreement contained in a letter dated 17 April 2003. The terms of the Agreement included the defendant’s agreement to construct a large steel plant in Newcastle, New South Wales, and undertake iron ore mining in Western Australia. The plaintiff agreed to invest in necessary infrastructure.

4 The parties are involved in an arbitration of disputes arising under the Agreement, as amended, in which the defendant is the claimant and the plaintiff is the respondent. The defendant, as claimant in the arbitration, claims more than $500 million in damages. The plaintiff, as respondent, denies any breaches of the Agreement and also puts causation and quantum in issue.

5 Clause 14 of the Agreement governs dispute resolution and provides as follows:

14.1 Dispute Resolution
If any difference or dispute arises out of or in connection with this Agreement, the following procedure must be followed in order to resolve it:
(a) a party may give written notice of the dispute to the other party. A representative nominated by each party must meet within 5 business days of receipt of that notice and attempt in good faith to resolve the dispute;
(b) if the dispute remains unresolved within 10 business days of receipt of the notice referred to in paragraph (a) above, notice will be given to the Chief Executive Officer (or officer holding an equivalent position) of Austeel and the Director General or Deputy Director General of Premier’s Department, New South Wales who must meet and attempt in good faith to resolve the dispute within 5 business days of the date of receipt of that notice.
For the purposes of this clause, a meeting may take place by telephone or other means of communication.
14.2 Alternative Dispute Resolution
(a) If the parties fail to resolve the dispute after following the procedures set out in clause 14.1, then they must agree on the appropriate method of alternative dispute resolution (which may include expert determination or mediation) within 10 business days of the date of the final meeting held in accordance with clause 14.1 (b).
(b) If the parties select expert determination as the method of resolving the dispute, the expert must act as an expert and not an arbitrator, his determination will be binding upon the parties unless otherwise agreed on his costs must be shared equally between the parties.
(c) If the parties fail to agree on the appropriate method of alternative dispute resolution in accordance with clause 14.2 (a), the dispute must be referred for mediation to a mediator nominated by the then current Chairman of Australian Commercial Disputes Centre in Sydney, or, if the body no longer exists, the Chairman of a reputable commercial dispute resolution body, as agreed between the parties, but if they cannot agree, nominated by State. The role of the mediator is to assist in the resolution of the dispute and the mediator may not make a decision which is binding on the parties.
(d) the costs associated with appointing the mediator under clause 14.2(c) must be shared equally between the parties.
14.3 Arbitration
(a) if the parties fail to resolve a difference or dispute after following the procedure is set out in clause 14.2, the difference or dispute will be finally settled by arbitration conducted in New South Wales in accordance with the then existing laws of that State including the Commercial Arbitration Act (NSW). The decision of the arbitrators shall be final and binding on the parties and, except to secure a stay of any the court proceedings commenced by a party contrary to the obligation to arbitrate imposed by this Agreement or to seek an interim or interlocutory injunction or similar provisional relief, no party may take any difference or dispute to any court.
(b) Without limiting the generality of paragraph (a), no appeal shall lie to a court on any question of law arising out of an arbitration award made pursuant to paragraph (a), nor may any party seek the determination by a court of any question of law arising in the course of an arbitration.
(c) Arbitration pursuant to this clause 14.3 will be rendered by a panel of arbitrators. Each party must appoint one arbitrator within 14 days of receiving a notice from a party advising the details of an arbitrator that has been appointed by the first mentioned party and give notice of the same to the other party. If a party does not appoint an arbitrator within the said 14 days, then the President of the Institute of Arbitrators and Mediators, Australia shall be free to appoint that party’s arbitrator and also to appoint an additional arbitrator in the event that the number of arbitrators then appointed is an even number. The arbitrators must decide the difference or dispute by majority decision and this decision must be made within 30 days from the date of appointment of the last arbitrator pursuant to this paragraph (c) with the hearing of any difference or dispute to commence within 14 days of the appointment of the last arbitrator. The hearing of any difference or dispute will not exceed 10 days with each party having an equal amount of hearing time to present its case. The decision of the arbitrators will:

(i) be in writing;
(ii) state the identity of the arbitrators and the time and place of the decision;
(iii) state the reasons on which it is based; and
(iv) bear the signatures of at least 2 arbitrators.

6 On 7 November 2003 the defendant issued a Notice of Dispute purportedly pursuant to Clause 14.1 of the Agreement. The plaintiff challenged the validity of that Notice and on 21 November 2003 Palmer J dismissed the plaintiff’s claim that the Notice was invalid: State of New South Wales v Austeel Pty Limited [2003] NSWSC 1077. Palmer J observed at [17]:

… The dispute resolution clause in this Agreement is highly unusual: it provides a tiered series of dispute resolution mechanisms, beginning with the most informal and unstructured-a meeting between the parties’ representatives, possibly even by telephone-proceeding through a more serious but still unstructured meeting between the parties’ most senior executives, then either to expert determination or mediation, if all other steps fail, to a structured arbitration under the Commercial Arbitration Act 1984 (NSW).

7 Palmer J also observed at [24]:

… The project the subject of the Agreement is a very large one involving expenditure of hundreds of millions of dollars over a considerable time. It must have been within the contemplation of the parties that it was likely that disputes would arise between them, some straightforward and capable of relatively easy resolution and others extremely complex and difficult. Yet one dispute resolution mechanism is provided for all disputes, with a large or small, straightforward or complex. Clearly, clause 14 requires that, whatever the character of the dispute, it will be resolved speedily and within a strict timeframe, no doubt in the interests of commercial expediency. If the dispute happens to be extremely complex, then the lawyers conducting arbitration are required to adopt Procrustean measures to accommodate it to the available arbitration time.

8 On 12 December the Court of Appeal (Mason P, Meagher & Giles JJA) dismissed the plaintiff’s appeal from Palmer J’s judgment: State of New South Wales v Austeel Pty Ltd [2003] NSWCA 392.

9 Three arbitrators have been appointed, the last having been appointed on 12 February 2004 (the start date). Clause 14.3 (c) provides that the arbitration hearing must begin within 14 days of the start date, being by no later than 26 February 2004 and the arbitration is presently fixed for commencement on that date. There have been two preliminary conferences before the panel of arbitrators, the first on 12 February 2004 and the second on 18 February 2004 and it is apparent that there have been further conferences before at least one of the arbitrators on 19 February 2004 and at 8am this morning. The arbitrators have decided that the rules of evidence will not apply to the arbitration however I have been informed that the Chairman of the panel of arbitrators (the Chairman), has listed the matter before him on 25 February 2004 for the purpose of dealing with questions of general objections to statements.

10 The parties agree that in order to comply with Clause 14.3(c), the arbitration hearing must commence no later than 26 February 2004 and conclude no later than Sunday 7 March 2004. The parties also agree that in order to comply with Clause 14.3 (c) the arbitrators’ award must be rendered by 12 March 2004.

11 At the first preliminary conference on 12 February 2004 the Chairman said at tr. 9, line 43:

It is a matter for the parties, but there is a lot of money involved here. What we had in mind was whether the parties would agree to extending the time for the award to Monday, 22 March.

12 After some debate in which the plaintiff agreed to an extension and the defendant submitted that the arbitration should be “conducted in accordance with the clause as written” the Chairman said at tr. 10, line 7:

Very well. If there is no agreement on that, and subject perhaps, when we are considering it, to whether we take the view that section 14 of the Arbitration Act enables us, of our own volition, to extend the time, we will remain bound by the arbitration agreement, and we will certainly let the parties know if we wish to hear further on that.

13 After a further submission from the defendant that the Agreement “would prevail” the Chairman said at tr 10, line 28:

If we return to that issue, we will certainly receive submissions from the parties, but at the moment we will conform with the agreement.

Orders sought

14 The plaintiff seeks orders including the following:

1. An order that, in relation to the dispute notified by Notice of Dispute dated 7 November 2003 (the Dispute), the time within which the arbitration hearing must commence, pursuant to Clause 14.3 of the Austeel Steel Agreement (the Agreement), be extended to 28 days from the appointment of the last arbitrator.
2. An order that the time for the conduct of the hearing of the Dispute, pursuant to Clause 14.3 of the Agreement, be extended so that the hearing will not exceed 14 business days, with each party having an equal amount of hearing time to present its case.
3. An order that the time within which the arbitrators must decide the Dispute, pursuant to Clause 14.3 of the Agreement, be varied to 7 business days of the conclusion of the arbitration hearing.

15 The plaintiff’s application is made under section 48 of the Commercial Arbitration Act 1984 (NSW) (the Act) that provides:

48 (1) Subject to subsection (3), the Court shall have power on the application of a party to an arbitration agreement or an arbitrator or umpire to extend the time appointed by or under this Act or fixed by the agreement or by an order under this section for doing any act or taking any proceeding in or in relation to an arbitration.
(2) The Court may make an order under this section although an application for the making of the order was not made until after the expiration of the time appointed or fixed for doing the act or taking the proceeding.
(3) An order shall not be made under this section extending the time within which arbitration proceedings might be commenced unless-
(a) the Court is satisfied that in the circumstances of the case undue hardship would otherwise be caused; and
(b) the making of the order would not contravene the provision of any enactment limiting the time for the commencement of arbitration proceedings.

Preliminary point

16 A preliminary point arose in respect of the plaintiff’s capacity to bring this application. The defendant submitted that the parties “gave up” their entitlement to make application under section 48 of the Act by use of the words in Clause 14.3 (a) & (b). Mr Holmes QC, who appears for the defendant, relies upon sub-paragraph (b) in support of the proposition that the plaintiff is precluded from bringing this application. It is submitted that a question that is required to be determined in the plaintiff’s application is what is the proper construction of clause 14.3; does the Agreement, properly construed, permit the plaintiff to make this application? It is submitted that the determination of that question is the determination of a question of law and is thus prohibited by clause 14.3(b): Jennings v Credit Corp Australia Pty Limited (2000) 48 NSWLR 709 at 713.

17 Mr Sackar QC, who appears for the plaintiff, took me to a number of cases at the outset of the hearing today but returned to one in particular in respect of this preliminary point. He submitted that Mr Holmes' submission is without substance. Section 48 is in clear and unambiguous terms. It is granting to this Court a power on the application of a party to an arbitration agreement to extend the time appointed by the Agreement. Clause 14.3 (a) of the Agreement refers to the arbitration being conducted in accordance with the existing laws of New South Wales, including the Act.

18 Mr Sackar QC submitted that this is not a process of construing the terms of the Agreement. He submitted that the power is given to the Court, irrespective of what the parties have agreed to. He pointed out that the section does not say, for instance, that the Court shall have power “unless a contrary intention appears in the agreement”. It is, of course, intended that this Court should have a limited supervisory power of extending the time in certain circumstances. Reliance was placed upon the judgment of the High Court in PMT Partners v Australian National Parks and Wildlife Service (1995) 184 CLR 301. In the joint judgment of Brennan CJ, Gaudron and McHugh JJ, the following was said at page 313:

The nature and purpose of section 48 is clear. It is a provision conferring power on a Court to relieve against agreed time limits which might otherwise prevent or interfere with the fair and proper processes of arbitration. Its remedial nature and the consideration that a provision conferring a power to be exercised judicially should be construed as liberally as its terms and context permit tend in favour of treating the expression "in or in relation to" in s 48 as being wide enough to encompass the taking of a step such as that directed by cl 45(a), which is a condition precedent to arbitration, even if arbitration is the inevitable consequence of that step.”

19 PMT Partners was a case in which the clause under consideration was in respect of the submission of a dispute to a superintendent with various subsequent steps prior to arbitration. Mr Sackar made clear that he was not suggesting that this case was on all fours with what has been put to me by Mr Holmes. Mr Holmes submitted that no matter how the plaintiff puts it, the Court has to decide whether the plaintiff is entitled to make this application and that requires the construction of the Agreement which itself is a question of law.

20 One matter that is not in issue is that the plaintiff is a party to an “arbitration agreement” as referred to in s 48(1). It seems to me that the question is one of fact. Should the parties to that agreement have an extension of time? Although Mr Holmes submissions are tantalising, I am satisfied on balance that section 48 gives power to the Court to hear an application made by a party to an “arbitration agreement”, and thus decide the question of fact irrespective of any question of law. The preliminary point raised by the defendant fails. I now turn to the substance of the application.

The Application

21 Both parties approached the application on the basis that s 48(3) does not apply because the proceedings have already commenced with the appointment of the last arbitrator on 12 February 2004 when time began to run. Although the plaintiff does not have to establish undue hardship as a pre-requisite to an order for extensions of the times it seeks, it was submitted that, in any event, the evidence does establish that compliance with the time frames in the Agreement will cause “undue hardship”. It is submitted that if such hardship is established, although unnecessary in this case, it would support the exercise of my discretion in the plaintiff’s favour. The discretion is unfettered but must be exercised judicially: Haskins & Anor v Brae-Villa Homes Pty Ltd, VSC, O’Bryan J, 27 July 1995.

22 “Hardship” is defined in The Macquarie Dictionary, Federation Edition, The Macquarie Library, at page 865, as “a condition that bears hard upon one; severe toil; trial; oppression, or need”. The New Oxford Dictionary of English, Clarendon Press, Oxford 1998, defines “hardship” at page 837, as “severe suffering or privation”. “Undue” has been defined relevantly as, “not proper, fitting, or right; unjustified” and “unwarranted or inappropriate because excessive or disproportionate”: The Macquarie Dictionary at 2043; The New Oxford Dictionary of English at 2017. Lord Denning MR said that undue hardship: “simply means excessive. That is greater hardship than the circumstances warrant. Even though a claimant has been at fault himself, it is an undue hardship on him if the consequences are out of proportion to his fault”: Liberian Shipping Corporation v A King & Sons Ltd [1967] 1 Lloyd’s Rep 302 at 307.

23 The plaintiff does not concede fault, but submitted that even if the plaintiff were at fault, the evidence establishes that the consequences of complying with the timeframe presently set would impose undue hardship.

24 The plaintiff relied upon the affidavits of Julianna Rose Warner of 19 February, 20 February and 22 February 2004. I should note immediately that Mr Holmes did not object to the last of those affidavits but submitted that having regard to the very tight time frame that has been set for this hearing, it was not possible really to meet that evidence or call evidence to rebut it. The defendant relied upon the affidavit of Professor Clive Frederick Palmer sworn 19 February 2004 and that of William Thomas Haseler sworn 22 February 2004.

25 Ms Warner is a partner of Freehills, the solicitors for the plaintiff. She has practised as a solicitor for 23 years in this State and has been a partner of Freehills for 10 years. In her first affidavit Ms Warner set out the detail of the Agreement and the background to the emergence of the dispute.

26 The Notice of Dispute issued on 7 November 2003 is 19 pages long and alleges, in 42 paragraphs, numerous disputes, including allegations of: failure to rezone the steel mill site; failure to pay for electrical studies; failure to provide information; failure to progress certain infrastructure; failure in relation to the decontamination of the site; and a series of allegations in respect of hindering or delaying negotiations and documentation for dredging infrastructure. There are also allegations of failure to prepare and lodge an environmental impact statement; failure to develop the south arm navigation channel; failure to provide security of tenure of the land corridor referred to in the Agreement; failure to progress development of the port site; failure to adopt an open book account and a refusal to meet with the defendant. There are general allegations of hindering and delaying the project resulting in loss and damage at that time in the amount of $14,100,000. Since then, as I have said, the parties have indicated to me that the claim is in the vicinity of conservatively $500 million.

27 Ms Warner sought particulars in respect of the claims made in the Notice of Dispute. The defendant’s response to that request included the following:

Austeel's estimate as at the date of this notice of its losses are the expected profits for the period of delay as set out in the Mizuho Bank's financial model for the project.

28 Ms Warner gave evidence that a further letter was written to the defendant on 14 January 2004 in which was stated the following:

The arbitration is in relation to your 7 November 2003 notice of dispute and you have confirmed that you intend to rely on the Mizuho model referred to at paragraph 41 (a) of the notice. Accordingly our client's advisors will need to review and comment on the model in order to prepare for arbitration. Since you have not provided us with any updated version of the Mizuho model and you appear to be delaying doing so we shall proceed on the basis that the relevant particulars of damage are as set out in the notice by reference to the copy of the model which is attached as appendix A to the FAR. We shall provide that report to advisors to facilitate preparation for the arbitration.”

29 Ms Warner’s affidavits also deal with other aspects of the preparation for arbitration to which I will return in due course. One of the matters raised by the plaintiff in seeking the orders in the Summons is the size and complexity of the claim made by the defendant in the arbitration. It is submitted that the claim is “huge” in monetary terms and the complexity of the matter is demonstrated by the Points of Claim, 108 pages long, containing more than 30 separate allegations of breach of contract and allegations of bad faith and fraud.

30 The plaintiff also claims that the defendant has not particularised its claims properly, although as I understand the evidence that has been prepared very urgently for this application, it is apparent that on the evening of 19 February 2004, last Thursday, further material was provided to the plaintiff that may dilute that complaint.

31 There is in evidence as exhibit 1, a list of 22 statements that have been served by the defendant on the plaintiff. The first 14 of those statements were all prepared and sworn or signed prior to 6 February 2004. Nine were finalised in January, five prior to 21 January, two on 28 January, one on 29 January and two on 30 January. Two were finalised on 4 February, one on 5 Febraury and two on 6 February. There are 8 other statements, one dated 13 February, three dated 16 February and four dated 17 February 2004. All the statements were provided to the plaintiff on 16 and 17 February 2004 and it is apparent, although there was some dispute about this during the course of today's argument, that there are at least six lever arch folders plus 13 lever arch folders of documents that have been delivered to the plaintiff on 16 and 17 February.

32 The plaintiff submitted that the vastness of the issues can be seen both from the Points of Claim and from the information contained in Ms Warner's affidavits in relation to the nature of the statements that have been served. There is evidence that the statements contain allegations that are very wide ranging in respect of the breaches alleged in the Points of Claim. The plaintiff submitted that it can be seen from exhibit 1 that more than half of the defendant’s witness statements have been ready for weeks, since well before the start date and now the plaintiff has only a matter of days to respond to them. It is submitted that many of the statements contain material not foreshadowed in the Dispute Notice or in the Points of Claim so that the plaintiff was unable to prepare to anticipate such material before the statements were served.

33 There is also a claim that the defendant deliberately interfered with the plaintiff's attempts to try to get ready for this arbitration. However Mr Sackar QC submitted that the plaintiff does not need to prove that there was deliberate interference, because, in any event, the evidence establishes that there was delay caused to the plaintiff’s preparation in this very tight time frame.

34 There are in evidence some letters exhibited to Ms Warner's affidavit which disclose that the plaintiff was writing to a third party, Pro-met Engineers Pty Ltd, seeking documents, including documents reporting to and updating Austeel and monthly engineering reports and invoices.

Freehills’ letter to Pro-met of 20 January 2004 indicated that the plaintiff intended to make an application to this Court the day after the appointment of the third arbitrator, to be granted leave to issue a subpoena for production to be served on Pro-met. Indeed, the letter indicated that if it assisted they would even arrange for the documents to be collected and brought to the Court.

35 What happened thereafter was that Pro-met obviously notified Austeel it had received Freehills’ letter and Austeel then wrote both to Pro-met and Freehills. Mr Holmes QC submitted that there is nothing other than an open course of conduct adopted by Austeel evidenced in these letters. He submitted that Austeel informed Freehills that it was going to communicate with Pro-met and that its letter to Freehills would be sent to Pro-met. However, the letter that was sent to Freehills, advised that Austeel took the view that the documents sought by Freehills from Pro-met "do not form part of our claim set out in the dispute notice" and that the invoices "are not relevant to the proceedings". Austeel indicated to Freehills it did not consider that Freehills had a right to issue a subpoena. It then stated that the copy of that letter would be forwarded to Pro-met and its lawyers.

36 What Austeel did on the same day was to write to Pro-met requesting that Pro-met deliver up the documents that were in fact the subject of the proposed subpoena. That request was purportedly based upon a clause in a confidentiality agreement, a copy of which was enclosed with the letter to Pro-met. Austeel gave Pro-met until the following day at 12 noon to deliver those documents to it. Austeel did not inform Freehills that it was about to require such delivery up.

37 The debate between Pro-met and Austeel seems to have become heated and Austeel threatened Pro-met that it would terminate its retainer unless it did as it was being asked. Ms Warner took the view that the correspondence disclosed an intention to extract from the proposed subpoenaed party the documents that the plaintiff was seeking so that when the plaintiff sought them there would be nothing produced. I do not have to decide today whether it was the intention of the writer of the letters to do that. The consequence of it was simply a further use of resources in a manner that was not going to bring fruit by reason of the defendant seeking to get back from Pro-met its documents. Even if it was done pursuant to a true belief that this was something that was permissible in the teeth of the proposed subpoena and consistent with its desire to protect its confidentiality of documents, it seems to have deflected the plaintiff's energies unnecessarily. Indeed, Professor Palmer rejects any suggestion that he intended to do anything improper and I have taken into account his denial.

38 The next matter is the financial model, the Mizuho Model. Mr Holmes, I apprehend, agreed that the energies of the plaintiff were spent in using a model that is not being used in the arbitration. However he did suggest from the Bar table that there was somewhere a suggestion that it would not matter which model was used. That is not the evidence before me.

39 It was not until 12 or 13 February 2004 when the Points of Claim were apparently served, that the plaintiff received notice that the King model was unequivocally adopted by the defendant for the quantification of the huge damages that it claims. Had it been the case that the defendant could have informed the plaintiff that the King Model was to be used its energies would not have been expended in the wrong direction. Mr Holmes submitted I should read the correspondence carefully, which I have done in the limited time available, in which Professor Palmer indicated that certain documents were not in existence prior to a particular time. The statement of Mr King, the author of the King Model, is referred to in exhibit 1 as dated 6 February 2004. It must have been the case, that as at or before 6 February 2004 the defendant was aware that the King model was to be relied upon in the arbitration.

40 It seems to me that it would have been appropriate, proper and fair to remove the misapprehension that had been clearly communicated by Ms Warner to the defendant that the resources of the State were being utilised to prepare for arbitration on a model that was not going to be used. It does seem that those resources were deflected in this way up until 12 or 13 February 2004. It is worth noting that relatively recent authority indicates that, at least in litigation, parties should ensure that their opponents’ misapprehensions are corrected: White v Overland [2001] FCA 1333 at par [4]. This approach is based on the need to ensure that costs are not wasted and in my view is one that should be adopted in arbitrations. It is clear to me that the plaintiff proceeded for weeks prior to this arbitration on a false premise and that the false premise was not corrected.

41 The plaintiff submitted that the relief sought in the Summons will not convert a short arbitration process into a massive trial process. It is submitted that the relief sought would only extend the whole process by approximately three weeks and that it is still remarkably quick for a matter of this importance and complexity to be dealt with in under two months. What is being sought is to extend the time for the commencement of the hearing by two weeks, the time of the hearing (on a stop watch basis in which the parties have an equal time to present their cases) practically by four days, but only on business days, rather than business days and weekends, and the time for delivery of the award of the arbitrators to seven days after the hearing is concluded.

42 The defendant submitted that the Court should pay close regard to the terms of the agreement and to the parties' intentions that the terms of clause 14.3 with its tight time frame should govern the process of arbitration without interference from the Court.

43 The defendant sought comfort from the words of Mason P in an extra-curial speech at a conference on International Commercial Arbitration, Changing Attitudes in the Common Law’s Response to International Commercial Arbitration, The Arbitrator September 1999 page 73, (some of which are found in the President’s joint judgment with Spigelman CJ in Raguz v Sullivan (2001) 50 NSWLR 236 at 247-249) to submit that notice should be taken of the fact that this is not traditional commercial litigation and that the parties should be required to live within the accelerated timeframe to which they agreed.

44 Mason P said in the abovementioned speech, at page 78:

One of the options presented by arbitration is that of having a person who is not a legal expert participate in decision-making. Sometimes it is the advantage of allowing a legal expert to function with more flexibility and despatch than a charge. As with a jury, no one would expect that arbitrator to bring the strait-jackets of legal reasoning to the task. But as with a jury, experience teaches that substantial justice can be delivered by means other than the exquisite intricacies of a stately litigious saraband. As with a jury, a decision may come more quickly.

45 In the joint judgment in Raguz v Sullivan their Honours said at paragraph 50:

Despite continuing professional and judicial hostility, the commercial community has continued to support arbitration. If necessary, it was prepared to seek out legal regimes more sympathetic to party autonomy and readier to recognise the reasons lying behind the continued popularity of arbitration in particular fields. Legislatures and latterly, judges have belatedly sat up and listened. Widespread adoption of the UNCITRAL Model Law and the Australia-wide scheme of which the Act forms part reflect these developments.

46 Mr Haseler gave affidavit evidence that there were documents prepared as long ago as 1996 relevant to this project. He also gave a history of some previous disputation between the parties that had been settled by steps other than the ones presently being taken by the parties. Mr Haseler annexed to his affidavit various statements made by the present Premier and the present Treasurer in respect of the project. There is no doubt that this project is a very important project for the parties and for this State.

I am told that the contract is still on foot and that the arbitration is to proceed in the light of that fact.

47 On the one hand the defendant has submitted that it has complied with the tight time frame and has suffered prejudice. As I understand what Mr Holmes QC has put to me, the prejudice is that Austeel has had to prepare all of its statements in this pressure cooker environment whilst the plaintiff sat on its hands in respect of this application. Although Mr Holmes QC seemed to firstly embrace a submission that the defendant may have acted differently had the plaintiff come to the Court earlier, and thus I suppose taken the benefit of any order that might be made, I am afraid I am unable to accept that there is any force in that submission or one similar to it. It had prepared the majority of its statements before the start date. Austeel was not denied anything by the plaintiff coming to Court last Thursday. It was a matter for Austeel whether it agreed to the request the arbitrators made or the extensions the plaintiff sought. It was entitled, as it did, to make the submission both before the arbitrators and before me that this application to extend time should not be entertained and if entertained, it should not be granted.

48 The other point of prejudice that Mr Holmes referred to was that witnesses have been organised for the hearing, some of whom are from overseas, and that the arbitrators have made themselves available for the ten day hearing commencing on Thursday, 26 February 2004. There is no evidence before me indicating whether there is any witness who will be unavailable should the time frame be changed. There is some evidence that one of the arbitrators had what was referred to as a "not insurmountable" problem on 26 February 2004 but that is as far as it goes. Mr Sackar submitted that had his client come to the Court prior to making an assessment of the alleged unfairness or hardship in the true sense, then it would have been claimed that his client was acting prematurely.

49 The observation made by Palmer J that the parties chose to agree to this regime is one that is appropriate to adopt in this application. They did so in the circumstances that included: the involvement of persons and entities from around the world; circumstances that included anticipated huge amounts of profits: and awareness that complex steps would need to be taken to ensure the transport of the iron ore from the Pilbara in WA to New South Wales occurred smoothly. It is reasonable to assume that the parties appreciated the possibilities of disputation that may be complex, and, as has been observed by Palmer J and referred to in the Court of Appeal judgment, the cascading nature of the resolution clause was such that the parties contemplated that whatever their disputes they would try to settle them and if mediation, expert determination or meetings failed only then would they proceed to arbitration.

50 The courts have more recently commented, particularly in Raguz v Sullivan, on the judicial hostility that used to exist towards arbitration. There is no such tension these days. The arbitral process and the parties' entitlement to agree to arbitration is respected by the courts. Indeed, as can be seen from the judgment of Palmer J, and in part the Court of Appeal, there is emphasis upon the terms of the parties' agreement and the bargain that they struck.

51 The parties must have contemplated that hardship would have to be endured in a complex dispute to be arbitrated in such a tight time frame. However in this case I am satisfied that the circumstances are such that the hardship that has been imposed by the circumstances to which I have referred is greater than the circumstances warrant. It would not be reasonable for the parties to have contemplated that misapprehensions would be in place for a month and not be corrected. It is reasonable that the parties would have expected that they would engage in legitimate processes for the purpose of ensuring compliance with the time frames of the agreement. Each of them have taken those steps that are legitimate, including seeking information as to, for example, what model is to be used. However the misapprehension occurred and was not corrected.

52 It is not simply the misapprehension about the Mizuho Model that convinces me that the hardship is greater than the circumstances warrant. Although the parties agreed to a mechanism for a speedy resolution of their disputes, they have adopted a regime of preparation of statements and the like that does not comfortably fit within the tight timeframe. This huge claim with extremely serious allegations where one party has been preparing as diligently as possible but on a wrong premise, with wasted resources in the third party subpoena process, combined with the number of statements with wide ranging issues and large volumes of documents, cause greater hardship than is warranted for these parties to arbitrate their differences in the agreed time frame.

53 What is the real prejudice of extending this process? I cannot see any real prejudice. The dispute will still be arbitrated in a very speedy manner. I am satisfied in all the circumstances that I should make the orders sought in the Summons.

Orders

54 I make the orders in paras 1, 2 and 3 of the Summons filed on 19 February 2004. The defendant is to pay the plaintiff's costs of these proceedings.

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Last Modified: 02/27/2004