Brecon v Ripa

55025/04 Brecon Builders Pty Ltd v Ripa Steel Fabrications Pty Ltd JUDGMENT 1 Master: This is the hearing of a summons in which the plaintiff seeks an order setting aside the final award of an arbitrator Mr Peer Dalland made on 17 March 2004, on the ground of misconduct pursuant to s 42(1) of the Commercial Arbitration Act 1984 (NSW). In the alternative, the plaintiff seeks an order for leave to appeal against the award and an order setting aside the award, on the ground that it contains a manifest error of law on the face of the award. Background to the arbitration 2 The Plaintiff is a builder that specialises in the concrete construction of factory and industrial complexes.

3 In May 2002, the plaintiff entered into a sub-contract agreement with the defendant Ripa Steel Fabrications Pty Ltd to design, fabricate, deliver and erect structural steel work for a warehouse development being constructed by the plaintiff at 205 - 215 Port Hacking Road, Miranda. The project involved the construction of five concrete tilt buildings housing 37 factory units with mezzanine offices.

4 A dispute arose between the parties, with the defendant asserting that it was owed under the contract an outstanding amount of $217,966.55. The plaintiff counterclaimed for a total sum of $267,588.32. The dispute was referred to Mr Peer Dalland, an engineer, pursuant to the Commercial Arbitration Act.

5 On 17 March 2004 Mr Dalland handed down a final Award. By that Award, the plaintiff was ordered to pay the defendant the sum of $186,273.24, inclusive of GST. The Arbitrator rejected the largest component of the plaintiff's counterclaim, being delays caused by the defendant. 6 A preliminary conference took place on 16 June 2003, at which time an Arbitration Agreement was signed. The Arbitration Agreement reveals the following: "The parties were, at the preliminary conference, both legally represented; At para 2(g) the parties agreed that the provisions of the Commercial Arbitration Act including all amendments up to Act 1990, would apply; At para 3(i), the parties agreed that the Arbitrator would determine questions that arise for determination of the cause of the proceedings strictly by law and not by reference to considerations of general justice and fairness; In para 5(i), evidence in chief would be given by statement, and at point 5(j), the parties agreed that no oral evidence would be given unless requested by the Arbitrator; That the parties agreed in order to simplify the procedures to adopt a written submission process; The parties would frame their claim by reference to points of claim, defence and counter-claim." 7 In due course the parties filed appropriate documents to outline their claims. On 25 June 2003 the defendant lodged its points of claim and in them claimed the balance owing under the contract. On 1 August 2004, the plaintiff lodged a defence and counter-claim. The plaintiff's counter-claim comprised the following components: "(a) damages for delay caused by Ripa's failure to complete the works for Blocks to A - E, causing Brecon to incur added costs and expense, in the amount of $160,256.61 (plus GST);

(b) a failure to properly carry out the work, requiring Brecon to engage others to supply and install additional chemical anchors and raking angles in the amount of $21,405.50;

(c) the cost of remedying the incorrectly installed roof steel over the mezzanine areas, costing the amount of $61,600.00.

These amounts, (including GST) totalled $267,588.32. As is self-evident, the largest proportion of this amount was the delay-based claim of $160,256.61." 8 On 21 August 2003 the defendant lodged a document in reply to the counter-claim lodged by the plaintiff. In response to the delay claim which is the only matter in issue in the present proceedings the defendant's response was as follows: ".8 - With time being of the essence to complete the works then Brecon themselves hindered this process, if we do not have the correct information on the documentation provided and Brecon were unable to provide a more timely response to our RFI's (ref RFI register) how are we supposed to fabricate steel when we can not obtain the shop drawing to start with.

9 The defendant made further submissions, in their reply to the counter-claim, on the final page under the heading "Summery" (sic). There it is said: "As for the delays on the program, Brecon's interpretation of the RFI register and there (sic) impact on the process is more than questionable by there own admission how can any RFI be of a 'none critical nature' (.93) if it holding up the completion of the drawing given that there (sic) whole argument on delays is that 'time is of the essence' referring to there program and for Brecon to infer that our detail as requested turnaround times of anything else other than an immediate response is a joke and totally denied by our shop detailers who worked on this project (See Doc 11). RSF deleted the delay causes (sic) in its contract with Brecon because past experience on there sites had proven to be a battle at the best of times to try to carry out any process and this project was no different. With the level of organisation on the site being so poor delays on site are inevitable and Brecon on this project and others in the pasted like it refuse to accept any responsibility, hence the delay clause being deleted and accepted by Brecon." 10 No assertion was made by the defendant, in any of its "pleadings", that in relation to the running of time under the contract, the plaintiff, by its conduct, in any way waived the time stipulations there under or was estopped from enforcing the time provisions. 11 It is this omission, which is important in the proceedings. It was submitted by the plaintiff that in dismissing this component of the cross-claim, the Arbitrator: "(a) engaged in misconduct pursuant to s.42(1) of the Commercial Arbitration Act 1984; (b) delivered reasons which contained a manifest error of law on the face of the Award, justifying an order that leave be granted to the Plaintiff to appeal against the Award pursuant to s.38(4), and an order that the Award be set aside." 12 The basis of the claim for misconduct was that without the parties having raised any question of waiver as to the time clauses and stipulations that time was to be of the essence which appear in the contract, the arbitrator decided the matter on that basis without giving the parties notice of his intention to do so, or any opportunity to present evidence on that aspect. As will be seen, the arbitrator placed particular reliance upon the absence of any letters from the plaintiff complaining about the defendant's delay in completing the contract. There was in fact a substantial amount of correspondence between the parties in which the plaintiff complained of the defendant breaches of the time stipulations in the contract. The arbitrator's reasons. 13 The principal findings in respect of the contract were as follows: "… that a contract was entered between Ripa and Brecon on 10 May 2002, which incorporated a subsequent letter, sent by certified by mail from Brecon to Ripa, which nominated the dates for completion set forth in Ripa's facsimile of 22 May 2002 as the 'worst possible case' (Award, para 7.1.3); the contract dates for the fabrication and erection of steel work were those submitted by Ripa on 22 May 2002, as follows: Block A 26 June - 11 July Block B 3 July - 17 July Block C 15 July - 19 July Block D 18 July - 15 July Block E 20 July - 24 July (Award, para 7.2.4);

the Arbitrator accepted that the contract contained a term that 'time was of the essence';" 14 The actual clause that provided for time being of the essence in the contract was as follows: "TIME the project starts on site on or before 13/06/02 and is due to be completed on or before 09/07/02. It is essential that the schedule must be maintained. The completion date of the project is not the completion date for these works, but for the whole project. It is the sub-contractors' obligation to ensure that there are sufficient materials and labour to meet the builders adjusted schedule in normal working hours. The builder reserves the right to supplement labour materials to ensure maintenance of the program. Should the builder unduly delay the sub-contractor the delay shall be notified and approved in writing to be accepted. Time is of the essence on this project." 15 In paragraph 7.2 of the final Award the arbitrator dealt with the question of delays. Between 7.2.1 and 7.2.21 he dealt with the factual circumstances surrounding the delays and found that both parties were responsible in some measure for the delays. His reasoning then proceeded in the following terms: "7.2.22 In considering the consequences and contractual implications of the delays, the conditions of the Contract as well as subsequent actions, or lack of actions must be taken into account. 7.2.23 I have accepted that as of 29 May 2002 there was an agreed time schedule for Ripa's work and that time was of the essence. However, many subsequent events gave rise to delays and Brecon was fully aware at least as early as 26 June 2002 that Ripa would commence erection of steel work to Block A four days late. 7.2.24 According to the statement of Stevens, Brecon was gravely concerned about the delays with the steel work, but Brecon did not document their concerns, nor did they provide Ripa with a revised time schedule. Brecon was indifferent to delays in responding to RFI's and had also waived the requirement for Engineer's approval of the shop drawings.

7.2.25 Time had therefore ceased to be of the essence and Brecon , on the evidence provided to me, did not issue any new notices making time of the essence again. This does not mean that time was at large, but Ripa was not required to complete by a certain date and Brecon did not disapprove of Ripa's performance by way of formal notice. 7.2.26 I have noted correspondence dated 8 August 2002 between Brecon and Ripa, which indicates that there are arguments about time schedules and site access, but I have given these documents no weight as they contain no specific claims or specific notice relating to any future contract performance. 7.2.27 There are no provisions in the contract documentation which lay down procedures for applying for extension of time, and the onus was on Brecon, the main contractor, to establish new completion dates by way of written notices which would have made time of the essence once again and required Ripa to respond in writing. 7.2.28 The Contract documentation including the standard of information given on the drawings is poor and the absence of written communications between Brecon and Ripa during the sub-contract period is difficult to understand considering the claims and counterclaims in this case. 7.2.29 Ripa has admitted conditional responsibility for delays to Block B, but even in this instance Brecon did not provide any documentation expressing concerns or requesting Ripa to pay for additional equipment hire during extended on-site modification work, or if they did the issue has not been canvassed by either party and I have informed myself in the best possible way from the documentation provided. 7.2.30 I am not convinced by any evidence presented to me that Ripa acted unreasonably or negligently although I am convinced that neither Ripa nor Brecon performed their contractual obligations with any great skills. The absence of a revised construction schedule and the selective manner in which Brecon applied contract conditions set the scene for the problems that followed. 7.2.31 Brecon adhered strictly to the contract conditions with regard to progress claims which resulted in Ripa experiencing cash flow problems, whilst Brecon completely ignored the requirement for drawing approval which, as I will determine later could have avoided or mitigated the problem with the box gutters. 7.2.32 Ripa in their submissions has alleged that the project was delayed due to problems with local authorities relating to easements, but no dates or supporting information has been submitted. 7.2.33 I have not been able to conclude that the delays in steel erection actually caused the project handover date to be delayed. By its own submission (EX R 1 - 41) Brecon was not subject to liquidated damages, but has had to indemnify the Owner against water damage which may result from inadequate box gutter size. 7.2.34 For all the above reasons, and mainly because time had ceased to be of the essence, I have concluded that Ripa is not responsible to Brecon for damages for delays as claimed by Brecon." 16 Although he did not limit his reasons completely in paragraph 7.2.34, it is clear that the arbitrator considered the time had ceased to be of the essence and therefore the defendant was not responsible for damages. In paragraph 7.2.24 the arbitrator made a similar finding based upon inter alia the fact that the plaintiff did not document their concerns about the delays nor did they provide the defendant with a revised time schedule. It is plain on the contract that there is no obligation to provide a new time schedule if someone delays. Having found that there were specific time requirements and that time was of the essence, it was of course open to the arbitrator to decide that the plaintiff had waived the time requirements. 17 He returned to the matter in paragraph 7.2.29 and it apparently occurred to him that there might be some correspondence on that matter. I will not go into the details of the correspondence that actually existed between the parties, but is plain that there is sufficient correspondence to have removed any doubt that the plaintiff did not complain about the delays. 18 The arbitrator's comments in paragraph 7.2.27 are also interesting and his conclusion that the onus was on the plaintiff, the main contractor to establish new completion dates is simply not available if one considers the terms of the contract. No doubt if there had been an election to waive the passing of completion dates, it may have been available to the contractor to issue further notices in an attempt to reinstate time as being of the essence of the contract. 19 When one looks at the issues that are set out in the pleadings the defendant raises as a reason for the delay the failure of the plaintiff to respond to their requests for information. They did not even in any layman's language raise or touch upon the plaintiff having either waived or elected to accept the defendant's poor performance in respect of time. Similarly matters of this nature do not appear in the defendant's submissions to the arbitrator. 20 It is in these circumstances where the arbitrator has effectively made a decision that the plaintiff had waived the time requirements of contract that one needs to examine this conduct in terms of procedural fairness to the parties. The law on misconduct 21 The relevant provisions of the Commercial Arbitration Act are section 42 and the definition of misconduct found in section 4(1). Those sections are as follows: "42 Power to set aside award

(1) Where: (a) there has been misconduct on the part of an arbitrator or umpire or an arbitrator or umpire has misconducted the proceedings, or (b) the arbitration or award has been improperly procured, the Court may, on the application of a party to the arbitration agreement, set the award aside either wholly or in part. (2) Where the arbitrator or umpire has misconducted the proceedings by making an award partly in respect of a matter not referred to arbitration pursuant to the arbitration agreement, the Court may set aside that part of the award if it can do so without materially affecting the remaining part of the award. (3) Where an application is made under this section to set aside an award, the Court may order that any money made payable by the award shall be paid into court or otherwise secured pending the determination of the application." 22 The definition of misconduct in s 4(1) is as follows: " misconduct includes corruption, fraud, partiality, bias and a breach of the rules of natural justice." 23 The duty imposed upon arbitrators to conduct themselves and the arbitral proceedings in accordance with the 'rules of natural justice', derived from the cumulative effect of ss 42(1) and 4(1), reflects the common law rule that it is a "fundamental principle of justice" that arbitrators accord fairness to the parties: Varley v Spatt [1955] VLR 403 at 411, per Herring CJ. In comparison to behaviour in the nature of corruption or fraud, whether an arbitrator has engaged in 'misconduct' such as to act unfairly or deny natural justice is a matter of procedural irregularity rather than "moral turpitude". As stated by Isaacs J in The Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 570 at 588:

"…the word 'misconduct' as employed in this connection includes even a mistake in the procedure which has or may have unjustly prejudiced a party." 24 Similarly expressed by Atkin J in Williams v Wallis and Cox [1914] 2 KB 478 at 485, in this context the "term does not really amount to much more than such a mishandling of the arbitration as is likely to amount to some substantial miscarriage of justice." 25 It is clear on the authorities that a breach of the rules of natural justice will occur if the arbitrator surprises the parties with a particular finding or findings in the award or decides an unpleaded matter without giving notice to the parties. 26 The first sub-branch of the rule commonly arises in the context of arbitrations wherein the tribunal is entitled to deploy its own expert knowledge and/or make enquiries on and of its own motion in respect of the matters in dispute. What is required of arbitrators when such extraneous knowledge or materials are to be utilised was stated by Donaldson LJ in Thomas Borthwick (Glasgow) Ltd v Faure Fairclough Ltd [1968] 1 Lloyd's Rep 16 at 29: "A trade tribunal is fully entitled to use its own knowledge of the trade. Indeed the fact that it has this knowledge is one of the reasons why it exists and performs a most useful purpose. Experience, however, dictates that this knowledge shall never be used in such a way as to take a party by surprise. If therefore a tribunal considers that both parties have missed the point- this sometimes happens both in litigation and in arbitration- it should invite the parties to deal with this point and, if the point arises for the first time in the course of deliberations after the hearing, should offer the parties a further hearing if either wish to avail themselves of the opportunity." 27 A good illustration of this problem is Interbulk Ltd v Aiden Shipping Co Ltd (The "Vimeira") [1984] 2 Lloyd's Rep 66. In this case the respondent shipowners let a vessel to the appellant charterers who, in turn, sub-chartered the vessel for the purpose of carrying a cargo of grain from Mississippi to Ghent. Upon discharge, it was discovered that the vessel's keel had incurred severe damage due to what was assumed in the later arbitration to be a lack of water depth. Nonetheless, in the final award the arbitrators decided the issue of liability primarily by reference to the alleged lack of sufficient turning space in the port at Ghent for a ship of the Vimeira's size, despite this issue not having been one ventilated in evidence or in submissions. Moreover, had they been provided the opportunity to adduce it, the charterers were in possession of ample evidence tending to indicate that ships of far greater length regularly put in at Ghent. The Court of Appeal unanimously held that misconduct had occurred on the basis that, as detailed by Robert Goff J [at 75]: "In truth, we are simply talking about fairness. It is not fair to decide a case against a party on an issue without drawing the point to his attention so that he may have an opportunity of dealing with it, either by calling further evidence or by addressing argument on the facts or the law to the tribunal." 28 Alternatively expressed by Ackner LJ [at 76]: "If an arbitrator considers that the parties or their experts have missed the real point- a dangerous assumption to make, particularly where, as in this case, the parties were represented by very experienced Counsel and solicitors- then it is not only a matter of obvious prudence, but the arbitrator is obliged, in common fairness or, as it is sometimes described, as a matter of natural justice, to put the point to them so that they have an opportunity of dealing with it." 29 Nonetheless it does appear that there are limits to this positive duty which entitles an arbitrator to assume that sufficient evidence has been placed before him or her so as to enable a decision to be made upon the application of his or her own knowledge and the incorporating the results of his or her own enquiries. In Edible Oil Products (Malaysia) BHD v Jayant Oil Mills Private Ltd [1982] 2 Lloyd's Rep 95, the appellant sellers contracted with the respondent buyers for the supply of certain quantities of palm oil, an agreement that was conditional upon the latter opening satisfactory letters of credit. Upon the buyers' default of this condition, the sellers sold the oil to third parties and commenced arbitration proceedings against the buyers for damages. Under the contract, in such circumstances, the seller's remedy was restricted to the difference between the sale and market price of the oil unless letters of intention to sell were served upon the defaulting buyers. While such letters had indeed been sent, they were not placed in evidence before the arbitral tribunal as (so far as can be gleaned from the subsequent reasons of Staughton J) counsel for the sellers was under the impression that the submissions - which cast the seller's claim in damages - made it plain that the condition as to letters of intention to sell had been complied with. In the event, however, the sellers were only awarded the difference in price, and they sought to have the determination set aside on the basis that the arbitrators should have notified them of their assumption as to non-compliance with the condition as to the letters. In declining to find that misconduct had occurred, and after reference to the general rule that arbitrators must not take the parties by surprise, Staughton J said [at 97]: "Of course, that is a proper principle which I wholly accept. However, I am not sure that it would be right to categorize as misconduct every failure to comply with that principle and certainly not any failure that occurred in the present case. All professional Judges realise that it is their duty to put to an advocate a point which may be decided against him but which has not yet been drawn to his attention by the other side and has not occurred to him of his own motion. However not even professional Judges always succeed in fulfilling that duty. I certainly would not categorise as misconduct a failure by the Board of Appeal to fulfil it. Furthermore, the Board of Appeal in these cases had before them a bundle of documents. There were no notices of intention to resell in the bundle. They were fully entitled to assume that an experienced arbitrator [that is, counsel] such as Mr Scott would put in the bundle whatever documents were relevant. "

30 It is nonetheless instructive to note, however, that while Staughton J declined to set aside the award, he nonetheless remitted it to the arbitrators for further consideration in light of the fact that letters of intention to sell were indeed in existence. 31 In respect to the obligation to confine the matter to the issue presented for resolution there are two useful cases. In Pacol Ltd v Joint Stock Co Rossakhar [2000] 1 Lloyd's Rep 109, the appellant sellers contracted with the respondent buyers for the supply of bulk quantities of sugar for use in the latter's Russian operations. Due to a severe downturn in the Russian economy, the buyers were unable to acquire sufficient reserves of hard currency so as to meet its contractual obligations, to which the sellers responded by serving notice of their intention to engage the arbitration clause of the contract. The arbitration was to be conducted by documents alone, and it was clearly established at the 'pleading' stage that the only issue between the parties was as to the quantum of the seller's loss, the buyer already having conceded liability. Nonetheless after briefly questioning the parties as to the meaning of the expression 'as soon as conditions allow' in the contract, the arbitrators proceeded to dismiss the seller's claims on the basis that the contract had not been breached; viz, that the downturn in the Russian economy ensured that the conditions did not allow for performance. On the seller's application to have the award set aside for 'serious irregularity' (the less pejorative equivalent of 'misconduct' now in s 68 of the Arbitration Act 1996 (UK)), Colman J held that the questioning of the arbitrators in no way constituted notice of their intention to reopen the question of liability- given that it had been "very firmly closed" by the pleadings- before adding [at 115]:

"It is particularly important in arbitrations which are conducted on documents alone that arbitrators should be alive to the dangers of introducing into their awards matters which have never been, or have ceased to be, matters in issue between the partie s. This case is a particularly glaring example of the arbitrators simply ignoring the definition of issues which had been arrived at prior to the time when they had to determine the issues then referred to them.

In a paper arbitration the temptation to arrive at a conclusion which may not have been envisaged by either party by reference to matters upon which the parties have not had the opportunity of addressing the arbitrators or in respect of which they have not had an opportunity of adducing further evidence, may be a particular temptation which arbitrators should be careful to avoid." 32 Upon this reasoning, therefore, Colman J had little hesitation in setting aside the award on the basis that a serious irregularity had occurred.

33 Similarly in Shirley Sloan Pty Ltd v Merril Holdings Pty Ltd (t/as Airen Constructions) [2000] WASC 99, a builder and an owner were in dispute as to whether, as required by the contract, "dry dressed Oregon" timber was used for the purposes of the roof framing of a new building. In finding that the timber used by the builder met the requirements of the contract, the arbitrator, without inviting submissions or evidence to be presented on the matter, came to his conclusion by comparing the dimensions of the timber used to that of seasoned (as opposed to green) softwood in the relevant Australian Standard. In contrast, the parties had approached the question as principally concerning whether the timber had been air or kiln dried. Moreover, had the opportunity been provided the owner could have adduced evidence to the effect that the timber used in the house had been dressed down from green to seasoned dimensions immediately prior to delivery. Thus as stated by Steytler J [at 32]:

"There is, in this case, no real contest as to the fact that the arbitrator did not give to the parties the opportunity of dealing with the point canvassed ... Neither party had raised it and neither expected the arbitrator to raise it. It is readily apparent from the affidavit evidence put forward by the applicant that, had the parties been given an opportunity to deal with the point, it would have been shown to be one of no substance, at worst for the applicant, or, at best for the applicant, one which supported a conclusion different to that at which the arbitrator ultimately arrived." 34 Accordingly, the award was set aside as a whole. 35 Finally, however, it must be borne in mind that the obligation of the arbitrator to not travel 'beyond the pleadings' of the parties is by no means absolute. Rather, as merely a sub-branch of the broader rules as to fairness and natural justice, it still must be demonstrated that the relevant party has suffered 'unjust prejudice' or a 'serious injustice' as a result of the alleged misconduct. Discussion 36 First, in respect of the first rule this case appears to be on all fours with the decision in Interbulk Ltd v Aiden Shipping Co Ltd (The "Vimeira"). Specifically the arbitrator has, without notice, reached a conclusion of fact (that the plaintiffs did not document the delays of the defendant and were 'indifferent' to them) not dealt with in the submissions of the parties, when the defendant was in possession of material seemingly capable of refuting the accuracy of that conclusion. Following on, the arbitrator then came to a conclusion of law that was critical to the merits of the plaintiff's claims; namely, that by failing to object (or so the arbitrator assumed) to the defendant's delays, time ceased to be of the essence. Certainly, as submitted by the defendant, for tactical reasons or otherwise, the plaintiff failed to place such material before the arbitrator for his perusal. However, it does not follow that that failure allowed the arbitrator to assume that no such evidence existed, given that the parties had submitted to the process on the express contractual basis that the dispute was to be 'framed' by points of claim, defence and counter-claim. As the defendant did not raise a defence at any stage to the effect that the plaintiff had waived the contractual stipulations as to time, then the arbitrator was not entitled (without misconducting himself) to assume that the parties had 'missed the real point' and thereby fail to provide the opportunity of responding to his proposed factual conclusions.

37 In this respect it can perhaps be said that Edible Oil Products (Malaysia) BHD v Jayant Oil Mills Private Ltd is an exceptional case. While the seller's inability to adduce evidence of the letters in that case proved insufficient a basis upon which to ground a finding of misconduct, it can perhaps be distinguished on the basis that, first, it was the decision of expert counsel not to place the letters before the tribunal and, second, that decision was apparently taken as a result of an erroneous apprehension that the arbitrators were aware that letters had been sent. In the instant proceedings, the plaintiff's failure to adduce evidence appears to be based more on an assumption that the issue of waiver was not even before the arbitrator. There is a significant difference between an assumption as to the arbitrator being aware of a certain state of affairs, the existence of which is a key element of the assuming party's case, and an assumption as to there being no dispute put before the arbitrator as to the existence of a key element of the assuming party's case (that is, that it had not sat idly by without objecting to the defendant's delays). While a decision without notice in the former instance might be said to flow from the default of the assuming party in not presenting a complete case, in the latter instance it might be said to flow from the unjustified departure by the arbitrator from his or her primary task of determining the issues submitted to him or her (or giving the parties an opportunity to respond when further issues arise).

38 Moreover, while the submission of the defendant that in arbitrations conducted pursuant to the Commercial Arbitration Act the arbitrator may inform him or herself of any matter deemed fit, it is manifest on the authorities that this liberty does not override the paramount duties to act fairly and in accordance with the rules of natural justice.

39 In respect of the second rule the instant proceedings appear to be directly in line with the decisions in Pacol Ltd v Joint Stock Co Rossakhar and Shirley Sloan Pty Ltd v Merril Holdings Pty Ltd (t/as Airen Constructions). It is clear that in the points of claim and reply, no issue is raised by either party as to any failure by the plaintiff to object to the defendant's delays; rather, the defendant's approach was to attempt to shift responsibility for the delays back onto the plaintiff while accepting that time remained of the essence. In such circumstances, the defendant's contention that waiver was the very subject matter of the evidence placed before the arbitrator cannot be sustained. Rather, that subject matter concerned which party was responsible for failing to comply with contractual timelines that remained on foot. Accordingly, there does not appear to have been any warrant for the arbitrator to come to a finding of fact as to supposed conduct of the plaintiff that was said to have constituted a waiver, without first giving the parties the opportunity to make submissions on the matter or adduce further evidence.

40 Finally, given the centrality of the issue of delay to the plaintiff's claims and the amount thereof, it is evident that substantial injustice or unjust prejudice was suffered by it as a result of this failure of the arbitrator to give notice.

41 In these circumstances I propose to set aside the award. Although the application for leave to appeal was heard at the same time it would be inappropriate, given that I have decided to set aside the award to deal with that application. In any event it was put forward as an alternative to the claim under s 42 of the Commercial Arbitration Act. The question that next arises is whether I should remit the matter back to the arbitrator under s 43 of the Commercial Arbitration Act. That section is in these terms: "43 Court may remit matter for reconsideration Subject to section 38(1), the Court may remit any matter referred to arbitration by an arbitration agreement together with any directions it thinks proper to the arbitrator or umpire for reconsideration or, where a new arbitrator or umpire has been appointed, to that arbitrator or umpire for consideration." 42 I am of course now concerned with a situation where the award is to be set aside under s 42 of the Commercial Arbitration Act. The power to remit in these circumstances has been referred to in a number of cases. In Imperial Leatherware Co Pry Ltd v Macri & Marcellino Pty Ltd (1991) 22 NSWLR 653 Rogers J at 669 said: "Ultimately though the situation appears to me to be this. The Act relevantly provides three gateways for court participation, to use a neutral phrase, in arbitrations. The principal one, subject to exclusion by agreement of the parties, is the highly circumscribed provision for appeal on questions of law provided by s 38. The second is the opportunity to remit matters under s 43 where it is necessary to correct some injustice in the sense explained by Lord Donaldson in MF King. The third is the removal of an arbitrator for misconduct."

43 Rogers J's dictum above was referred to by Giles J in Sabemo Pty Ltd v Malaysia Hotel (Aust) Pty Ltd (unreported, NSW Sup Ct, 4 June 1992) where at 4-5 his Honour said: "Remission may follow the setting aside of an award for misconduct pursuant to s 42 of the Act, or it may be ordered in other circumstances as what has been described as the ultimate safety net. Remission pursuant to s 43 should not be used as a backdoor method of circumventing the restrictions on a court's power to intervene in arbitral proceedings (see Moran v Lloyd [1983] QB 542; Allgold Foods Pty Ltd v Conagra International (Australia) Pty Ltd (unreported, NSW Sup Ct, 11 July 1990, Giles J); Imperial Leatherware Co Pty Ltd v Macri & Marcellino Pty Ltd (1991) 22 NSWLR 653), but does that not mean that there can be no remission in the absence of a successful application for leave to appeal and success in the appeal. The description of an ultimate safety net comes from the judgment of Lord Donaldson MR in King v Thomas McKenna Ltd [1991] 2 QB 480. His Lordship said at 489 of the United Kingdom equivalent of s 43, citing from his own judgment in The Montan (1985) 1 WLR 625 at 632: Section 22 empowers the court to remit an award to an arbitrator for reconsideration. It provides the ultimate safety net whereby injustice can be prevented, but it is subject to the consideration that it cannot be used merely to enable the arbitrator to correct errors of judgment, whether on fact or law, or to have second thoughts, even if they would be better thoughts. In the instant case, [the arbitrator] has accidentally made a major error, which, if uncorrected, would lead to the charterers paying the owners, when it is the owners who should be paying the charterers. No court could lend the power of the state to the enforcement of such award and no court should stand by when it has power to correct such an accidental error and I stress the word "accidental". 44 Rogers J at 669 cited with approval in Imperial Leatherware Co Pty Ltd v J Macri & Marcellino Ply Ltd, part of a longer passage of Lord Donaldson's judgment which included words to the effect that the jurisdiction to remit is usually to be invoked in relation to procedural mishaps or misunderstandings but was not limited to those circumstances.

45 In the present case the arbitrator has dealt with the other minor claims, but the major claim is affected by the problems referred to in this judgment. In the circumstances and having regard to the fact that the error in procedure is easily corrected, it would be appropriate to remit the matter to the arbitrator with appropriate directions. I direct the parties to bring in short minutes of the appropriate directions for remission to the arbitrator and I will deal with costs on that occasion.

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