Viterra Operations Ltd (T/A ABB Grain & Handling) v Ewing International Limited Partnership (No 2) - [2011] SASC 83

SUPREME COURT OF SOUTH AUSTRALIA
(Appeals to a Single Judge)
VITERRA OPERATIONS LTD (T/A ABB GRAIN & HANDLING) v EWING INTERNATIONAL LIMITED PARTNERSHIP (No 2)
[2011] SASC 83
Judgment of The Honourable Justice Sulan
13 May 2011
ARBITRATION - THE AWARD - EFFECT AND PERFORMANCE - GENERALLY
ARBITRATION - THE AWARD - FORM AND CONSTRUCTION OF THE AWARD - GENERALLY
Appeal against two arbitration awards made in respect of a dispute between the parties relating to eight silos - appellant contends that Arbitrator made determination in First Interim Award as to entitlement to damages - whether findings in Second Interim Award made without advising parties and without inviting them to lead further evidence or make further submissions to clarify position - whether failure to afford procedural fairness.
Further issue as to admissibility of expert report - whether Arbitrator failed to inform parties of admission for limited purpose.
Whether appellant had sufficient notice of the issue of payment for cones - whether appellant should have applied to re-open.
Held: Appeal allowed. Matter referred to Arbitrator for further determination.
Fair Trading Act 1987 (SA), referred to.
Escobar v Spindaleri & Anor (1986) 7 NSWLR 51, applied.
Kioa v West (1995) 159 CLR 550; Morgan Belle Pty Ltd v API Services (Vic) Pty Ltd [2005] SASC 488; Decor Ceilings Pty Ltd v Cox Constructions Pty Ltd [2005] SASC 146, considered.

VITERRA OPERATIONS LTD (T/A ABB GRAIN & HANDLING) v EWING INTERNATIONAL LIMITED PARTNERSHIP (No 2)
[2011] SASC 83
Civil

SULAN J: This appeal is limited to certain findings and conclusions of an Arbitrator, the subject of two interim arbitrations awards dated 17 May 2010 and 21 September 2010 respectively. The appellant, Viterra Operations Ltd (formerly Ausbulk Limited trading as ABB Grain Storage and Handling) (“Ausbulk”), sought permission to appeal against certain findings and conclusions of the Arbitrator. Ewing International Limited Partnership (“Ewing”) opposed the application for permission to appeal. On 22 November 2010, I granted permission. I published my reasons dated 25 November 2010.[1] Ewing sought permission to appeal my decision to the Full Court. On 11 March 2011, the Full Court refused permission to appeal.[2]
[1] [2010] SASC 328.
[2] [2011] SASFC 13.
Background
Ewing and Ausbulk entered into a contract on 24 January 2006 (the first agreement), in which Ewing agreed to construct eight grain storage silos at Pelican Point. The subject of the appeal relates to the construction of what are known as Bisalloy cone sections, which were to form the bottom and lower sections of each silo. During construction, deformations appeared. The parties were in dispute. In late 2006 work ceased. Each party alleged the other was in breach of the contract. On 16 February 2007, an agreement was reached to resolve the dispute (the second agreement).
The second agreement
The second agreement, in its preamble, acknowledged that Ausbulk and Ewing had entered into a contract, dated 13 December 2005, that certain disputes had arisen between the parties and, as a consequence, Ausbulk issued a ‘stop works’ order. The parties had issued notices which defined their dispute. The agreement provided that those disputes had been resolved and that Ausbulk would immediately arrange to pay to Ewing the sum of $1.2 million in settlement of various claims. Ausbulk agreed to pay to Ewing the reasonable cost associated with remobilisation. Ausbulk agreed to appoint an independent consultant, in consultation with Ewing, to value and assess Ewing’s work and interest on any monies due but not paid to Ewing. A number of other clauses were included in the agreement evidencing the parties’ arrangements, which are unnecessary to detail in these reasons.
The independent review referred to in the contract was carried out by consultants, Currie and Brown, who are quantity surveyors. They prepared a report referred to as the Currie and Brown Report.
The dispute did not resolve and, on 14 June 2007, Ausbulk terminated the first agreement and sought damages. It also sought the return of $1.2 million paid by it to Ewing, pursuant to the second agreement. Ewing claimed relief by way of contractual entitlements and damages in the amount of about $6 million. The matter was referred to arbitration.
The First Interim Award
The Arbitrator defined the primary issues between the parties as: Was Ausbulk entitled, under the contract or at common law, to terminate the first and second agreements? If so what, if any, damages is it entitled to? If not what, if any, damages is Ewing entitled to receive for wrongful repudiation? In the first interim award, the Arbitrator concluded:
1.That both parties evidenced an intention not to be bound by the first contract and that both parties had repudiated that contract.
2.Having reached that conclusion, the question remained as to whether either of the parties had any other existing rights which entitled them to a remedy notwithstanding the findings. That matter was reserved for further consideration.
3.Ewing had not made good its entitlement to damages for asserted breach of contract by Ausbulk.
4.Ausbulk cannot succeed in its counterclaim based on breach of contract, negligence and for breach of the Fair Trading Act in seeking damages for asserted consequential losses suffered.
5.The expert report of a forensic accountant, Mr Morris, which calculated Ausbulk’s loss at $19,245.558 was dismissed. The cost of replacement cones of $631,654.56, as calculated by Mr Morris, survived on breach and causative loss.
6.Ausbulk had repudiated the contract and was not entitled to damages for the additional cost of completion of the works, nor for the additional work associated with the provision of stiffeners.
7.Ausbulk’s claim for recovery of $1.2 million paid pursuant to the second agreement may also survive the findings.
The question of the consequential issues, which the Arbitrator concluded may survive his findings, were referred for further argument and evidence.
The Second Interim Award
On 21 September 2010, the Arbitrator published the Second Interim Award. He observed:
1.On 17 May 2010 I delivered an interim award in which I found:
1.1.   Ewing is not entitled to damages from Ausbulk for breach of contract;
1.2.   Ausbulk is not entitled to damages for the additional costs of completing the work for breach of contract by Ewing;
1.3.   Ausbulk is not entitled to damages for the additional costs associated with the provision of stiffeners to the silos.
1.4.   The question of whether Ausbulk is entitled to the return of the sum of $1.2 million claimed by it in its counterclaim and the costs of replacement of cones, together with the question of any interest and costs, is deferred for further argument.
Notwithstanding the above, I also said in my Reasons (para 297) that:
“I wish to hear the parties further on any consequential issues that need to be addressed given my findings”.
2.At a directions hearing on 16 June 2010, I made orders requiring mutual exchange of written outlines in lieu of oral argument which was agreed to by the parties.
Subsequently, on 2 July 2010, I made further orders in terms of the Minutes of Order of 2 July 2010.
3.As a consequence of my orders, I received further submissions in writing as follows:
3.1.   Ewing’s submissions consequent upon the publication of the interim Award;
3.2.   Ausbulk’s submissions on remaining issues;
3.3.   Ausbulk’s Reply submissions to claimant’s submissions on remaining issues;
3.4.   Ewing’s submissions responding to Ausbulk’s Outline dated 9 June 2010;
3.5.   Ewing’s rejoinder to Ausbulk’s Reply dated 28 June 2010;
3.6.   Ausbulk’s submissions in rebuttal to claimant’s rejoinder submissions dated 12 July 2010.
4.The issues raised by the parties are as follows:
4.1.   Ewing seeks an Award in respect of cash security and retention moneys paid to Ausbulk in the sum of $1,432,820.00 inclusive of GST and interest on $1,302,564.00 (being the principal sum less GST) of $257,943.00;
4.2.   Ausbulk seeks an Award for loss of the bargain following Ewing’s breach, being the additional cost to complete the Contract in the sum of $14,526,775.00.
Alternatively, it seeks payment of the sum of $1.2 million, being the moneys paid pursuant to the agreement of 26 February 2007.
In addition, it claims $631,654.56 in respect of its claim relating to the Bisalloy cones;
4.3.   The parties ask that any cost consequences await this further interim award.
The Arbitrator made the following findings:
1.Ewing is entitled to an Award in respect of its claim for return of retention moneys of $1,302,564.00 less the sum of $969,624.00 owing to Ausbulk, namely $332,940.00 plus interest.
2.Ausbulk is entitled to offset against retention moneys held by it the sum of $969,624.00.
3.Ausbulk is not entitled to damages in respect of its claims for breach of the Agreement of 16 February 2007.
4.Ausbulk is not entitled to damages in respect of its claim relating to the Bisalloy Cones.
5.The parties are to be heard on any consequential orders with respect to costs, any GST applicable to the award and the appropriate calculation of interest.
The appeal
Ausbulk’s appeal is against the findings at paragraph 4 of the Second Interim Award that Ausbulk is not entitled to damages in respect of its claim relating to the Bisalloy cones. Ausbulk complains that there was confusion resulting from the terms of the First Interim Award. Ausbulk contends that in the First Interim Award the Arbitrator found that Ausbulk was entitled to damages in respect of the provision of eight replacement Bisalloy cones. The Arbitrator found that it was not reasonable to require that the cones be repaired and that they needed to be replaced, and he found that Ausbulk was entitled to damages for the replacement of the cones. The issue which arose was that Ausbulk claimed that it had paid Ewing for the cones. Ewing contended that it had never been paid for the cones and, therefore, Ausbulk had not suffered consequential loss as it had never paid for the defective cones. Ausbulk relied upon a statement in the First Interim Award, at paragraph 270, in which the Arbitrator stated:
Next, Ausbulk seeks damages for eight replacement bisalloy cones. I am in agreement with Ausbulk’s contention in relation to this topic. I accept the evidence of the witnesses relied on and I find that Ausbulk is entitled to those damages. Given all that has happened since, it is not reasonable to require repair of the cones. (Underlining is mine)
As indicated by the Arbitrator, submissions were made to him prior to the delivery of the Second Interim Award. In summary, in those submissions on the question of replacement of the Bisalloy cones, Ausbulk contended that the Arbitrator had made a determination in his First Interim Award and it was, therefore, unnecessary to call further evidence. Further, it contended that, insofar as there may be any dispute about whether Ausbulk had paid Ewing for the defective cones, that matter had been dealt with in the Currie and Brown Report and was beyond dispute. Ewing contended that, first, it had not been proved that Ausbulk had ever paid Ewing for the cones. It contended that the evidence established that Ewing had not been paid for the cones. Further, it contended that, insofar as Ausbulk sought to rely on the Currie and Brown Report, that report had not been admitted into evidence, as it had been the subject of a dispute as to its admissibility. Furthermore, insofar as any parts of it were admitted, it could only be used for the limited purpose referred to in the second agreement, namely, for the purposes of assessing the value of Ewing’s work, which was unrelated to the question of whether Ausbulk had paid Ewing for the Bisalloy cones.
In his Second Interim Award, the Arbitrator concluded that Ausbulk’s reliance upon his comments in the First Interim Award had been misconstrued and that he was not making a finding as to Ausbulk’s entitlement to damages but, rather, a finding as to the nature of the damages. The Arbitrator summarised the issue relating to the cones at [85]:
Ewing says that Ausbulk’s reliance upon my comments in paragraph 270 of the Interim Award is misconstrued. Ewing says that I was not making a finding as to any entitlement to damages but rather a finding as to the nature of the damages. I must confess that the wording leads to some ambiguity. However, Ewing is correct. That is why I said in my Interim Award, paragraph 3, that “the question of whether Ausbulk is entitled to return of the sum of $1.2 million claimed by it in its Counterclaim and the cost of replacement of cones together with the question of any interest and cost is deferred for further argument”.
At [86], he said:
Accordingly, I agree that quantum has been decided but the entitlement has not. Further, I said in paragraph 295 of the Interim Award that the costs of the replacement cones, being $631,654.56 “may however survive my findings on breach and causative loss”.
Further, it is correct to say that that is why I did not deal with Ewing’s pleaded case in submissions on the point.
In paragraphs 87 to 89, the Arbitrator referred to Ewing’s submission that the only evidence in the arbitration about the value of work done was the assessment at the end of October 2006. He said that there had been no evidence from the relevant witnesses as to whether they had included a value for Bisalloy Cones. He referred to the evidence of a Mr Heard and said that Mr Heard had given evidence that no claim had been made for Bisalloy cones. Mr Heard’s evidence was not challenged.
The Arbitrator observed that Ausbulk had relied on his conclusions at paragraph 270 of his First Interim Report. He made the following findings:
92.I have carefully considered the arguments of the parties. Whilst it is true as observed above that paragraph 270 of my previous Reasons might be seen to justify the reliance placed on those observations by Ausbulk, the position is as referred to in paragraphs 85 and 86 above.
93.Given that there is a very specific claim with respect to the Bisalloy cones, I would have expected proof that Ausbulk had paid for specific work.
94.I have considered the Currie Brown reports and am mindful of what I have concluded with respect to that report earlier in these reasons. However, the basis of reception of the reports was confined to the context that they were obtained for the purpose of the then competing claims between the parties. That is, Ewing’s claim for monies said to be owing and Ausbulk’s concern as to monies already paid. The parties effectively compromised Ewing’s claims on that basis. I found in Ewing’s favour on that issue but subject to an agreed offset. The issue here should not be confused with that conclusion.
95.I agree with much of what Ausbulk says about the defects in the Bisalloy cones and I have previously concluded that, it would not now be reasonable to allow rectification of defects by Ewing. However, the final issue is important, namely, has Ausbulk suffered any loss? That is the subject of challenge by Ewing.
96.In all the circumstances, I cannot conclude that Ausbulk has proven loss and I find against Ausbulk with respect to this claim. There was a challenge to the assertion that the cones had been paid for. Whilst the Currie and Brown report is relevant to Ewing’s claim for the reasons expressed previously, it would not be received for any further purpose.
Ausbulk contends that the Arbitrator’s comments in the First Interim Award (paragraph 270) were ambiguous and had been misconstrued. The Arbitrator’s findings in the Second Interim Award that he had made a finding as to the nature of the damages, but not entitlement, was made without advising the parties and without inviting them to lead further evidence or make further submissions to clarify the position. The finding that quantum had been decided, but entitlement was not, was made without identifying that fact to the parties, and without giving the parties an opportunity to address him, particularly having regard to the inconsistencies in his statements at paragraphs 78 and 85 of the Second Interim Award.
Mr O’Sullivan QC, for Ausbulk, submits that the Arbitrator was aware that Ausbulk relied upon his reasons at paragraph 270 in the First Interim Award. Mr O’Sullivan refers to Ausbulk’s submissions to the Arbitrator in which Ausbulk referred to the Arbitrator’s conclusions in the First Interim Award at paragraphs 267 and 270. The submissions concluded that “there is no doubt that Ausbulk is entitled to damages in relation to the silo cones”.
Ausbulk’s contention is that the Arbitrator concluded at paragraph 86 in the Second Interim Award that, as to the Bisalloy cones, quantum had been decided but entitlement had not, without identifying that fact to the parties prior to the publication of his Second Interim Award. Ausbulk contends that the Arbitrator failed to give it an opportunity to make further submissions and/or call evidence. Ausbulk points to inconsistent statements of the Arbitrator in the Second Interim Award. At [78], the Arbitrator stated:
78.In my Interim Award, I concluded in paragraph 270 that I was in agreement with Ausbulk’s contentions in relation to defects. I found that Ausbulk was entitled to damages. Further, that it was not reasonable to require repair of the cones under the circumstances. Ausbulk points out that Ewing was contractually responsible. It has retained the benefit of payment for the cones. Ewing is liable to it. Ewing’s breach of Contract arose well before termination or repudiation by the parties.
Ausbulk submits that the finding that Ausbulk was entitled to damages is inconsistent with the later finding at [86] quoted earlier.
The further complaint by Ausbulk is that, at [94] and [96] of the Second Interim Award when the Arbitrator dealt with the Currie and Brown Report, he had admitted the Currie and Brown Report on the tender of Ewing, and had allowed cross-examination about its contents. Ausbulk contends that the first time its counsel was aware of Ewing’s objections to the report was in Ewing’s written submissions of 27 October 2009. It contends that the Arbitrator failed to inform the parties of his ruling that the Currie and Brown Report was admitted for a limited purpose. He erred in denying Ausbulk an opportunity to lead further evidence prior to the publication of the second interim award. Further, he failed to give adequate reasons for limiting reception of the Currie and Brown Report.
The substance of the appellant’s claim in that regard is that if it had been aware that the Currie and Brown Report was to be admitted only for a limited purpose, then it would have sought to call further evidence in respect thereof.
In essence, Ausbulk complains that there was a failure by the Arbitrator to afford Ausbulk procedural fairness.
Mr Jenner, for Ewing, responds that Ausbulk had misconstrued paragraph 270. Ewing submits that the Arbitrator’s finding was with respect to the nature of damages, not to entitlement. He refers to paragraph 295 of the First Interim Award in which the Arbitrator stated:
I find that Ausbulk cannot succeed in its Counterclaim based on breach of contract, negligence, and for breach of the Fair Trade Act in seeking damages for asserted consequential losses suffered. Those losses were articulated in the expert report of Mr Morris. He calculated the loss as $19,241,558.00 plus the cost of replacement cones being $631,654.56. The latter may however survive my findings on breach and causative loss. Ausbulk repudiated the contract and is not entitled to damages for the additional cost of completion of the works nor for additional work associated with provision of stiffeners.

Mr Jenner contends that the issue as to entitlement was always a live issue. Mr O’Sullivan responds that, after the First Interim Award, Ewing was attempting to re-argue the question of Ausbulk’s entitlement to damages. He refers to the passage from paragraph 270, and the First Interim Award and to Ausbulk’s submission to the Arbitrator in respect of the Second Interim Award:
Ausbulk’s primary contention in relation to its claim for loss as a result of the defective Bisalloy Cones is that it is clear that the Arbitrator has made a finding that Ausbulk are entitled to damages sought in relation to the Bisalloy Cones. That argument is repeated here.
Mr O’Sullivan contends that if it was wrong that the Arbitrator had decided the Bisalloy cones in its favour, then it was entitled to damages independent of the silo contract.
As to the Bisalloy cones, Mr Jenner submits that Ewing’s primary argument to the Arbitrator was that it was more appropriate to repair rather than replace the cones. He submits that the Arbitrator rejected that argument at paragraph 270, and went on to deal with that decision but did not deal with the value of replacement. He submits the question of whether Ewing had been paid for the cones was always a live issue. That issue was not dealt with in the First Interim Award, because the Arbitrator had not determined whether the claim could survive his findings of mutual repudiation. The Second Interim Award dealt with the issue that there was no loss because Ausbulk had not established that they had paid for the Bisalloy cones. Mr Jenner submits that it was obvious that Ewing had a different view on that issue. Further, there was an issue as to whether the Currie and Brown Report, which dealt with the payments that had been made, was in evidence.
Mr Jenner argues that the fact that Ausbulk paid someone else to construct the cones does not establish loss because it had never been established that Ausbulk had paid Ewing for the faulty cones. Mr Jenner submits that it is obvious from a series of submissions that the issue of the interpretation of paragraph 270 of the First Interim Award was a live issue. Mr Jenner submits that Ausbulk knew the position, knew the issues, and Ausbulk could have argued the issue. It could have applied to re‑open, but it chose not to do so. Ausbulk, therefore, took the risk and lost. Mr Jenner submits that when the submissions are considered chronologically, it is clear that there was no denial of procedural fairness, as alleged by Mr O’Sullivan. He contends that Ausbulk had not proved that it had, in fact, paid Ewing for the Bisalloy cones.
The written submissions
Turning, therefore, to the written submissions. On 27 October 2009, both parties made written submissions. In its outline of submissions, Ausbulk claimed damages over and above that which were payable to Ewing for completion of the contract for replacement of the cones and repayment of $1.2 million paid, pursuant to the second agreement.
As to the Currie and Brown Report, the contention was that, during oral submissions, Ewing had submitted that the Currie and Brown assessment should not be received into evidence. Mr O’Sullivan submitted that the Currie and Brown Report had actually been accepted into evidence because it was part of the tender book. He submitted that Ewing tendered the Currie and Brown document as part of its tender bundle, and Ausbulk had consented to that tender. He contended that Mr Heard, a witness for Ewing, had given evidence about the Currie and Brown assessment. Mr Case, an expert accountant, relied upon the Currie and Brown assessment in formulating his opinion about Ewing’s alleged losses. No objection was taken to the assessment.
Mr O’Sullivan contended that if the Arbitrator was disposed to reject the tender by Ewing of the Currie and Brown Report, notwithstanding Ausbulk’s consent to its tender, then he would apply to re-open Ausbulk’s case and call the appropriate witnesses. He contended that that step was unnecessary.
During his closing address on 1 December 2009, Mr Jenner made oral submissions that the Currie and Brown Report should be ignored because of the failure to call the author of that report. Mr Jenner put further written submissions on 7 December 2009 in which he submitted that the Currie and Brown Report could be ignored because the author was not called, and a contention of a binding agreement was not pleaded.
On 22 December 2009, Ausbulk provided a written reply. In reply, it was submitted that, if the Arbitrator was against Ausbulk on any of the submissions raised, Mr O’Sullivan invited the Arbitrator to raise any question he may have to give Ausbulk an opportunity to be heard further. He submitted that Ausbulk’s failure to respond to Ewing’s submissions in regard to matters raised by Mr Jenner should not be taken as a concession.
As to the Currie and Brown Report, Ausbulk made the following submissions to the Arbitrator:
1.That the Currie and Brown assessment is in evidence.
2.That Ewing tendered the Currie and Brown document as part of its tender bundle.
3.Ausbulk consented to that tender.
4.Mr Heard gave evidence about the Currie and Brown assessment.
5.Mr Case relied upon the Currie and Brown assessment in formulating his opinions about Ewing’s alleged losses.
6.Prior to closing submissions, no objection was taken to the assessment.
Mr O’Sullivan contended that, if the Arbitrator was disposed to reject the tender by Ewing of this document, notwithstanding Ausbulk’s consent to the tender, then he would apply to re-open Ausbulk’s case to call appropriate witnesses. He submitted that that step, however, was unnecessary.
In response, Mr Jenner submitted that Ausbulk’s submission was incorrect and that the Currie and Brown Report had not been tendered as part of Ewing’s bundle of documents. Mr Jenner submitted that Ausbulk had notice and should have applied to re-open its case. There was no such application. There was an opportunity to make further submissions after the Arbitrator delivered the First Interim Award.
Further submissions prior to the Second Interim Award
In its written submissions dated 9 June 2010, Ewing submitted that the claim should fail because Ausbulk had not established that it had suffered loss. Ewing submitted that a witness, Michael Heard, had given unchallenged evidence that Ewing had not claimed the cost of the cones from Ausbulk. The submission was that Ausbulk had not paid Ewing for the cones; therefore, it suffered no loss. It follows that a finding of entitlement by Ausbulk that Ausbulk could recover damages in respect of the faulty cones must fail because it had not established that it had paid Ewing for the cones.
In its submissions in reply on 28 June 2010, Ausbulk submitted that the Arbitrator at paragraph 270 of the First Interim Award determined the question. It submitted that Ewing was not entitled to re-open Ausbulk’s right to damages. Ausbulk contended as follows:
Ewing submits without development by reasoning or authority the basis, that Ausbulk is not entitled to damages because Ausbulk did not claim the costs of the repair or replacement of the cones prior to termination of the silo’s contract and only ……after determination. Such a submission has no foundation in law and is contrary to positive submissions put by Ewing to the effect that causes of action accrued prior to termination can be enforced after termination. It is quite clear on the authorities that the right to sue for existing breach survives termination; Ewing does not rely on any authority to contend otherwise.
It is beyond controversy in these circumstances that Ewing’s breach in relation to the Bisalloy cones occurred prior to termination.
As much is clear from the Arbitrator’s finding that Ausbulk is entitled to damages based on Ewing’s breach. Ewing’s interim award submissions on this issue should not be accepted.
Earlier in its written submissions of 9 June 2010, Ausbulk had stated that Ewing had retained a benefit of the payment for the fabrication of the cones, but failed to fabricate and supply them so that they were fit for the purpose for which they were ordered. It was submitted that Ewing’s breach is unrelated to termination.
On 28 June, Ewing submitted to the Arbitrator that Ausbulk had led no evidence to establish it had paid for the Bisalloy cones. Ewing submitted that there was no determination by the Arbitrator on the question of damages. It was submitted there was still a live issue on quantum. There was clear debate in the submissions by Ewing on 28 June suggesting that Ausbulk had not proved it had paid for the cones. The Arbitrator dealt with this submissions in his Second Interim Award.
The issue on this appeal is whether Ausbulk had sufficient notice of the issue of whether it had paid for the cones, and whether Ausbulk should have applied to re-open, if it had misunderstood the Arbitrator’s statement in paragraph 270 of the First Interim Award.
On 2 July 2010, the Arbitrator directed further written submissions. The timetable he set was that there was to be a rejoinder on 12 July and a rebuttal on 16 July. Mr Jenner submits that Ausbulk was in no doubt about Ewing’s position. It could have applied to re-open its case and it could have applied to prove the Currie and Brown Report.
In its 12 July submissions, Ausbulk, in reference to Ewing’s submission that the finding in paragraph 270 that Ausbulk is entitled to those damages is a finding as to nature of damages and not entitlement, submitted that the submissions is nonsensical. Ausbulk submits that to say that ‘entitlement’ as referred to in the Award does not mean entitlement is an attempt to misrepresent the meaning of the words in the award. Ewing submits that the Arbitrator had determined to proceed and, that if Ausbulk wanted to re-agitate the position, it should have sought permission from the Arbitrator and asked for a ruling.
The Currie and Brown Report, for the purpose of this case, dealt with two matters. First, to conclude that Ausbulk was entitled to a credit of $900,000, pursuant to the agreement. Secondly, whether Ausbulk was charged for and paid Ewing for the cones. The Arbitrator received the report for a limited purpose in respect of the first matter. Ausbulk says once in, it was in for all purposes. Ewing says it should not have been admitted at all. Alternatively, the Arbitrator was correct in admitting it for a limited purpose.
Legal principles
In Escobar v Spindaleri & Anor,[3] the appellant complained that the Judge in the compensation court had prematurely, and without offering counsel a proper opportunity to address, entered an award against the appellant. Kirby P referred to a number of authorities in support of the proposition that it is of importance that a party be given full opportunity to address and persuade the court of the merit of its case. There are occasions when a person who is arbitrating a dispute may form a preliminary view about a matter. It is necessary to ensure that the parties have an opportunity to consider and, if necessary, address aspects of the case which have not been addressed, but which the Arbitrator may consider are relevant. If a party makes decisions under a misapprehension and is not given an opportunity to deal with an issue, that may lead to a miscarriage of justice. There may be occasions when there is a genuine misunderstanding between the parties and the judicial officer.
[3] (1986) 7 NSWLR 51.
It may be no fault of either party or the judge that, due to a genuine misunderstanding, a party believed it was unnecessary to call evidence or address an issue. Not every instance will lead to a breach of procedural fairness. Often, tactical decisions are made which, on reflection, were wrong. That would never give rise to a claim of breach of procedural fairness. Each case must be considered on its own facts. If there has been a breach of procedural fairness, then that amounts to an error of law. In Escobar, the court approached the case on the basis that a breach of natural justice amounts to an error of law.
In Kioa v West,[4] Mason J said:
It is a fundamental rule of the common law doctrine of natural justice expressed in traditional terms that, generally speaking, when an order is to be made which will deprive a person of some right or interest or the legitimate expectation of a benefit, he is entitled to know the case sought to be made against him and to be given an opportunity of replying to it. The reference to “right or interest” in this formulation must be understood as relating to personal liberty, status, preservation of livelihood and reputation, as well as to proprietary rights and interests.[5] (References omitted)
[4] (1995) 159 CLR 550.
[5] Ibid 582.
Ewing does not contend that the principles of procedural fairness do not apply. Ewing contends that, in this case, the Arbitrator acted in accordance with those principles and that Ausbulk has not demonstrated error.
In Morgan Belle Pty Ltd v API Services (Vic) Pty Ltd,[6] Gray J considered the question of whether principles of procedural fairness apply to proceedings before arbitrators. In that case, the parties had not exchanged written submissions, with the result that one party addressed the question of costs and the other did not. There were issues between the parties on the matter of costs. Gray J observed:
The Commercial Arbitration Act confers powers. There is a corresponding duty of procedural fairness that arises particularly where the power involved is one which may destroy, defeat or prejudice a person’s rights, interests or expectations.
It is the fundamental rule of procedural fairness that when an order may be made that deprives a person of some right or interest or the legitimate expectation of a benefit, that person is entitled to know the case to be made against him or her and to be given the opportunity of replying to that case.[7] (References omitted)
[6] [2005] SASC 488.
[7] Ibid 10 [38] – [39].
It is in accordance with the principles referred to that I have determined the issues in this appeal.
Conclusion
After the First Interim Award, there had been a dispute between the parties about the Arbitrator’s conclusions. It is clear, having read the submissions, that, on the one hand, Mr O’Sullivan took the view that the Arbitrator had determined Ausbulk’s entitlement to damages for the defective Bisalloy cones. No further issue arose about whether Ausbulk had paid Ewing and was entitled to repayment of the amount claimed. Further, insofar as it was necessary to rely on the Currie and Brown Report, Ausbulk relied upon it.
Mr Jenner contended that the Arbitrator had not determined the question of whether Ausbulk had paid Ewing for the cones. Further, that Ausbulk could not rely on the Currie and Brown Report because it had not been tendered.
I have read the relevant extracts from the submissions. It seems that on the relevant issues, and in their submissions in respect of the Second Interim Award, the parties were like ships passing in the night.
Both parties were entitled to rely upon the position that they understood pertained after the First Interim Award. It was evident to the Arbitrator that there were differences in the interpretation of his findings. He acknowledged that the findings in the First Interim Award were ambiguous.
I consider it is unfortunate that the Arbitrator failed to call the parties before him to clarify the position. He received voluminous written submissions. I consider he should have recalled the parties and made it clear to them what his views were as to the meaning of his First Interim Award. If that had been clear, then it would have been open to Ausbulk to seek to reopen its case and call further evidence. Further, if the Arbitrator’s conclusion in respect of the use he intended to make of the Currie and Brown Report had been clear, then the question of whether the author was to be called could have been resolved.
I consider that the failure of the Arbitrator to make his position clear to the parties denied Ausbulk the opportunity to make further submissions and to re‑apply to re-open its case. In that regard, I consider that Ausbulk did not know the case against it. Counsel for Ausbulk genuinely believed the issue of payment of the cones had been determined. The Arbitrator acknowledged the ambiguity in his First Interim Report on that issue. Counsel should have been informed by the Arbitrator that he considered the issue of quantum had not been resolved.
In my opinion, these were matters that should be referred to the Arbitrator for further determination. It is a question for the Arbitrator whether he permits Ausbulk to re-open its case and what evidence, if any, he will allow.
Notice of contention
Ewing seeks leave to prosecute an alternative contention. Ewing contends that the Arbitrator should not have had regard to the Currie and Brown Report for any purpose, as the report was not relevantly in evidence before him.
Ausbulk submits that the notice of contention should not be received. Mr O’Sullivan argues that Ewing is attempting to contend that the Arbitrator is not entitled to have regard to the Currie and Brown Report, because it was never in evidence before him. He submits that Ewing should not be entitled to prosecute its contention, as it is attempting to argue a positive position which he submits is impermissible.
The Arbitrator admitted the Currie and Brown Report for a limited purpose. The parties were in disagreement about the status of that report. In my view, the question of whether the Currie and Brown Report is admissible and whether Ausbulk should be granted permission to reopen its case and call the author of the report are matters which should be the subject of further argument and deliberation by the Arbitrator.
In Décor Ceilings Pty Ltd v Cox Constructions Pty Ltd,[8] Besanko J considered to what extent a respondent to an appeal is entitled to rely on a Notice of Contention. He said:
Although a respondent to an appeal cannot by way of a notice of contention raise a challenge to the arbitrator’s findings of fact, I do not think that there is anything in the terms of s 38 of the CAA which prevents the raising of a question of law in a notice of contention as long as the question of law is used in a purely defensive way. The considerations identified by Lord Steyn in the passage set out above are important and I think a respondent can raise a question of law in a notice of contention provided it is used in a purely defensive way and its effect is not dependent on overturning any of the arbitrator’s findings of fact. For example, if a successful party before an arbitrator succeeded in showing a contract was void for illegality but did not succeed on its alternative argument that there was no contract because there was no offer and acceptance faces an appeal with leave by the unsuccessful party, then, providing the question of law about no offer and acceptance does not arise only if findings of fact are overturned, I see no reason why it cannot be raised in a notice of contention.[9]
[8] [2005] SASC 146.
[9] Ibid 4 [37].
In my view, Mr O’Sullivan’s contention is correct in that the notice seeks a positive finding about the admissibility of the Currie and Brown Report. Further, in my view, it raises factual issues as to the status of the report.
Even if I were to permit the Notice of Contention, for the reasons I have earlier given I would reject it and remit the issue of the admissibility of the report to the Arbitrator for consideration after he has had heard further submissions.
I reject the notice of contention.
The appeal is allowed.
I remit the matter to the Arbitrator to consider and determine:
1.Whether leave should be given to Ausbulk to re-open its case to call the authors of the Currie and Brown Report.
2.Whether Ausbulk’s claim for damages in relation to the Bisalloy cones should be reconsidered in the light of all the evidence.

I will hear the parties as to the terms of the orders and in respect of costs.