Applicant v Respondent

Applicant v Respondent - [2015] VSC 163 - VSC 2015 case summary — Zoe

[19]

1AC Paramount object of Act

(1) The paramount object of this Act is to facilitate the fair and final resolution of commercial disputes by impartial arbitral tribunals without unnecessary delay or expense.

(2) This Act aims to achieve its paramount object by -

(a) enabling parties to agree about how their commercial disputes are to be resolved (subject to subsection (3) and such safeguards as are necessary in the public interest); and

(b) providing arbitration procedures that enable commercial disputes to be resolved in a cost effective manner, informally and quickly.

(3) This Act must be interpreted, and the functions of an arbitral tribunal must be exercised, so that (as far as practicable) the paramount object of this Act is achieved.

(4) Subsection (3) does not affect the application of section 35 of the Interpretation of Legislation Act 1984 for the purposes of interpreting this Act.

...

2A International origin and general principles (cf Model Law Art 2A) s 2A

(1) Subject to section 1AC, in the interpretation of this Act, regard is to be had to the need to promote so far as practicable uniformity between the application of this Act to domestic commercial arbitrations and the application of the provisions of the Model Law (as given effect by the International Arbitration Act 1974 of the Commonwealth) to international commercial arbitrations and the observance of good faith.

(2) [ omitted ]

(3) Without limiting subsection (1), in interpreting this Act, reference may be made to the documents relating to the Model Law of -

(a) the United Nations Commission on International Trade Law; and

(b) its working groups for the preparation of the Model Law.

(4) Subsection (3) does not affect the application of section 35 of the Interpretation of Legislation Act 1984 for the purposes of interpreting this Act.

Note

This section differs from the Model Law. Art 2A(1) has been changed as a consequence of the application of the Act to domestic (instead of international) commercial arbitrations. Art 2A(2) is omitted because it is covered by the provision referred to in section 1AC(4). Subsections (3) and (4) reflect section 17 of the International Commercial Arbitration Act 1974 of the Commonwealth.

[38]

(1) Recourse to the Court against an arbitral award may be made only by an application for setting aside in accordance with subsections (2) and (3) or by an appeal under section 34A.

Note

The Model Law does not provide for appeals under section 34A.

(2) An arbitral award may be set aside by the Court only if -

(a) the party making the application furnishes proof that -

(i) a party to the arbitration agreement referred to in section 7 was under some incapacity; or the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication in it, under the law of this State; or

(ii) the party making the application was not given proper notice of the appointment of an arbitral tribunal or of the arbitral proceedings or was otherwise unable to present the party's case; or

(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or

(iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Act from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Act; or

(b) the Court finds that -

(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or

(ii) the award is in conflict with the public policy of this State.

(3) An application for setting aside may not be made after 3 months have elapsed from the date on which the party making that application had received the award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal.

(4) The Court, when asked to set aside an award, may, where appropriate and so requested by a party, suspend the setting aside of proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral tribunal's opinion will eliminate the grounds for setting aside.

[49]

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 they have made. 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 the [International Arbitration Act (Singapore, cap 143A, 2002 rev ed)].[25]
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 courts' 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 courts. 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.
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 assesses the real nature of the complaint. Among the arguments commonly raised in support of breach of natural justice challenges are these:

[62]

The paramount object of the Act (s 1AC) - being to facilitate the fair and final resolution of commercial disputes by impartial arbitral tribunals - supports the proposition that awards are not to be set aside easily and there should be minimal judicial intervention in awards. There is a strong public policy that underlies the Act in general, and s 34 in particular, in favour of supporting the parties' choice of arbitration for the final resolution of their dispute.[48]
It is of importance in this application that both of the decisions challenged by Cameron were procedural decisions. A decision to refuse to reopen proceedings is a procedural decision.[49] A decision about the admissibility of evidence is also a procedural decision.[50] Under s 19(2)-(3) of the Act and rr 10 and 13 of the IAMA Rules, the Tribunal had wide, flexible and discretionary powers to make procedural decisions about those matters.
Recourse under s 34 of the Act is available against "arbitral awards" and not against procedural orders and rulings.[51] That confirms that the principle of "minimal curial intervention" applies all the more strongly where the subject of the challenge is, in substance, a procedural order or ruling where the challenging party was heard, in full, on what order or ruling should be made and is simply dissatisfied with the Tribunal's decision on the procedural matter.
An application to set aside an award is not a proceeding in which evidence is re-evaluated and the correctness of the tribunal's decision on the merits is examined.[52] That an award might be legally or factually wrong (which is not the case here) is not grounds to set it aside.[53] As Cameron recited (but did not in fact reflect) in its submissions, an application to set aside an award made under s 34 of the Act is to be distinguished from an appeal against an award brought under s 34A of the Act. An application to set aside an award is not concerned with the substantive merits of the dispute, nor with the correctness or otherwise of the award in fact or law.[54] A setting aside application is not to be abused by a party who, with the benefit of hindsight, wishes he had pleaded or presented his case in a different way before the arbitrator.[55]
The grounds listed in s 34(2) of the Act are exhaustive of the grounds on which an award may be set aside.[56] The grounds should be construed narrowly.[57]
Even if one of the grounds for setting aside an award is made out, the Court retains a discretion to decide whether the award should be upheld or set aside.[58] No award should be set aside unless real unfairness and real practical injustice has been shown to have been suffered by a commercial party in the conduct and disposition of a dispute in an award.[59] Further, an award will not be set aside if it can be shown that the Tribunal would not have reached a different conclusion but for the matter complained of.[60] But that is not exhaustive of situations in which an award may be upheld in the Court's discretion.[61] Prejudice to the respondent and the significance of the error of the tribunal to the outcome are relevant factors to consider in the exercise of the discretion. The discretion must also be exercised in accordance with the overarching purpose in the Civil Procedure Act 2010.

[140]

(a) This was a technically complicated case involving issues about the operation of subsea oil production equipment in which both parties sought, and were afforded the opportunity, to furnish the Tribunal with expert evidence.

(b) Section 19(3) of the Act empowered the Tribunal to determine the admissibility of any evidence. Section 19(2) of the Act empowered the Tribunal to conduct the arbitration in such manner as it considered appropriate. (See also rr 10 and 13 of the IAMA Rules.)

(c) There was nothing in the arbitration agreement, the Act or the IAMA Rules that obliged the arbitrator to allow a party to tender or rely upon whatever evidence or material it chose.

(d) By the time of the hearing, the arbitrator had made procedural orders[149] dealing with the conduct of the hearing. Those procedural orders expressly contemplated that (a) expert evidence would be given by way of witness statement (PO4 at [14]; PO6 at [12]); (b) experts would conclave and produce a joint report (PO4 at [16]; PO6 at [2]-[3]); (c) each party was entitled to cross-examine witness called by the other party (PO6 at [7]); and (d) the contents of a witness statement would only stand as evidence where the maker of the statement was not required for cross-examination (PO6 at [8]). Cameron raised, and now raises, no issue about those orders. At the hearing, the Tribunal directed that witnesses give sworn evidence.[150] The Tribunal had power to make those directions, and they were scrupulously fair.

(e) Expert witness statements were provided by Mr Kuhnell (for Cameron) and by Dr Stark and Mr Witton (for AED). Each of those men attended the hearing, adopted his witness statements and reports, and was cross-examined.

(f) It is incomplete and misleading to say that the Tribunal "refused to permit Cameron to put Mr Terrell's report into evidence".[151] The Tribunal was quite willing to allow Cameron to put Mr Terrell's report into evidence, if it called him as a witness to adopt his report and be available for cross-examination. AED expressly took the same position. Its objection was to Cameron seeking to rely upon parts of the Terrell Report as opinion evidence if Cameron was not calling him as a witness and making him available for cross-examination.[152]

(g) Consistently with the procedural orders it had made, the Tribunal determined and informed the parties that it would not be assisted, at hearing, by the report of an expert who did not appear at the hearing without good reason. Cameron had the opportunity to call Mr Terrell; it elected not to do so. There was and is no suggestion that it could not call him; it simply chose not to.

(h) The Tribunal's reasons for adopting the course that it did were unimpeachable and Cameron says nothing against them:[153]

[143]

59 As indicated previously, the arguments put by Cameron in support of this ground of challenge are, in substance, an appeal against a ruling of the Tribunal, "dressed up" as a breach of the agreed arbitration procedure, seeking thereby to attract the operation of the provisions of s 34(2)(a)(iv). More particularly, but without detracting from this position, Cameron's claim and submissions in support of the claim fail to have regard to the provisions of s 19(3) of the Act and the provisions of the IAMA Rules. Insofar as it may be relevant, they also overlook the possible application of s 135 of the Evidence Act 2008 with respect to the construction of cl 10(c)(i) of the Dispute Resolution Deed, in general terms, if not more particularly, and, additionally, seek to rely upon other aspects of Victorian law, including r 44.04 of the Supreme Court (General Civil Procedure) Rules 2005. These provisions of the Rules are relied upon in support of the proposition that the Tribunal was in error in not having regard to the operation of r 44.04 which, it is said, enabled a party on whom an expert witness report is served to put that statement in evidence without calling the expert. As AED submits, this is not a correct statement of the position under r 44.04 because, set out in full, it is provided that: "Unless otherwise ordered, a party may put in evidence a report served on that party by another party under this Order." The reference made by Cameron to the decision of J Forrest J in Grinham v Tabro Meats Pty Ltd[154] is not at odds with the position put by AED. Moreover, the provisions of s 65G of the Civil Procedure Act 2010 do not detract from this position so as to oblige the Court or an arbitral tribunal bound by the procedural laws of the arbitral seat - Victoria - to admit an expert report tendered by a party, as a right and not subject to the exercise of a discretion by the Court - or such a tribunal. The position is, however, in the more general case and in the present case, that r 44.04 is a rule of procedure and not a rule of evidence and, consequently, does not impinge upon the operation of the provisions of the Act and the IAMA Rules to which reference has been made.

At a glance

Court

Decision date

Before

Source

Judgment (290 paragraphs)

Parties

Legislation Cited (10)

Cases Cited (12)