Cargill International SA v Peabody Australia Mining Ltd - [2010] NSWSC 887 - NSWSC 2010 case summary — Zoe

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Cargill International SA v Peabody Australia Mining Ltd

[2010] NSWSC 887

Supreme Court of NSW|2010-06-10|Before: Ward J

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Source facts

Court

Supreme Court of NSW

Decision date

2010-06-10

Before

Ward J

Source

Original judgment source is linked above.

Judgment (47 paragraphs)

[1]

For the reasons that I have earlier given, however, it is not appropriate that, sitting at first instance, I do other than apply Gatoil [1985] AC 255. Further, in what might be said to be in support of a wide construction of "arising out of" and a narrower approach to "relates to", the former expression should be wide to catch all claims that have a connection with an agreement that has the appropriate maritime connection or character. The appropriate maritime connection or character for s 4(3)(f) might be seen to be assisted by the recognition that all the general maritime claims in Article 1 of the 1952 Convention and in s 4(3) are expressed to be the foundation of an action in rem against a ship and to found the remedy of arrest. The relational connection in the phrase "that relates to" is to be seen in that context. It also may be important to see the appropriate maritime connection by reference to the Constitutional reach of s 76(iii). Section 4(3) must at all times be construed within the confines of the Constitutional authority given to Parliament: cf the Acts Interpretation Act 1901 (Cth), s 15A.

[2]

Approaching the matter by applying Gatoil [1985] AC 255, does or do any one or more of the agreements referred to in [43] above have a reasonably direct connection with the activity of carriage of goods by a ship and thereby " relates or relate to the carriage of goods by a ship " for s 4(3)(f)? 124 Adopting the reasoning of his Honour, the question whether a claim is a maritime claim is thus to be determined by applying a liberal approach to the question whether there is claim 'arising out of' an agreement but a narrower approach should be taken when considering the question of whether the agreement has the appropriate maritime character. In Heilbrunn, there was the necessary relationship or connection between the agreement and the carriage of goods by sea because the agreement for the loading of the container was seen as being "essential to the performance of the sea carriage". His Honour said, at [52]:

[3]

The cars had to be loaded into the shipping container in preparation for sea transport . That is what the defendant undertook to do. The loading of the container was, in substance, for the sea carriage . … The agreement to load the shipping container between the arranger of the carriage and its subcontractor had a reasonably direct relationship with the carriage of goods by the ship. (my emphasis) 125 In the present case, although the coal was not being loaded into a separate sea container to be put on board the ship, it is clear that the coal was being delivered for the purpose of and in preparation for its carriage by sea. The specification standards in the agreement make clear that aspects of the loading obligations were referable to conditions relevant to the carriage of goods by sea. 126 It seems to me that this is not a case, such as Gatoil International Inc v Arkwright-Boston Manufacturers Metal Insurance Co [1985] AC 255, where the contract in question is separate from the action involved in putting the ship in readiness for goods to be carried by sea. Rather the steps to be taken under the present contract were an essential part of putting the ship in readiness for the carriage of goods by sea. In Gatoil, by contrast, there was a claim for a contract for insurance of goods that were carried by ship and the House of Lords said this was not a sufficient connection. It can be seen that in that case the contract was not entered into to make possible or to facilitate or to further the purpose of carriage of goods by sea, but rather was to deal with the financial risk attaching to such carriage. Similarly, in the Port of Geelong Authority v The "Bass Reefer" (1992) 37 FCR 374, claims in relation to a lease of a cargo assembly at the port and a licence for priority berthing at a nominated berth did not satisfy the reasonable connection test. Neither of those cases is factually similar to the present. Mr Gleeson referred also to The "Catur Samudra" [2010] SGHC 18 where the High Court of Singapore held that to satisfy the direct connection test a claim under an agreement which is collateral or ancillary to the contract of carriage must be intrinsically related to the use or hire of a vessel. 127 Mr Gleeson submitted that the distinction between the present case and the Heilbrunn case was that in the present case the claim related to a contract anterior to something which subsequently happened on a ship. It was submitted that the reasonably direct connection must be with the use of the ship itself (relying on Geelong Authority and Heilbrunn). Further, it was submitted that the only connection with a ship was that the obligation was to deliver foods over the ship rail, with title to the goods and risk of loss or damage passing progressively to Cargill as the goods passed over the rail of the vessel. 128 It was said that the mere place for delivery could not transform the subject matter of the agreement from one for the sale and delivery of goods into a charterparty or the like. (As I understand it, this argument assumes that the fact that the goods were ultimately to be transported by sea was incidental to the contract, which could just as easily (assuming that were possible logistically) have been for delivery of coal to, say, a trucking terminal for delivery by road and with no suggestion of a maritime flavour.) In that regard, the fact that there might have been a different result had Cargill chosen to carry the coal it purchased by a different means seems to me not to be relevant - it might equally be said that had the vintage Vauxhall been transported by air, the contract for the loading of it into a container for transport by plane would not have been a maritime contract. 129 Here, the connection between the agreement for the delivery of coal and the carriage of that coal by ship is obviously closer to the position in Heilbrunn than the relationship of the contracts in the Gatoil and Geelong Authority cases to the use/hire of carriage of goods by ship. 130 If the contract to load and deliver a sea container to port was sufficiently connected to the use of a ship to give rise to a maritime claim (and not construed simply as a contract for the transport by road of goods to a place of delivery for later shipment by sea), then it is by no means clear why the agreement in question (which involves the physical delivery of the goods onto the ship for subsequent transport by sea) is not also sufficient to enliven the Admiralty jurisdiction. Indeed, but for the decision in Zeus, I would find it difficult to see any reasonable basis for distinguishing between a situation where the delivery is made by way of loading goods into a container to be transported to the port and placed on a ship and the situation where the delivery is made not by loading a container but by way of loading a freight car to be transported by rail to the port and then for the goods to be placed directly into the ship. 131 Does Zeus, which (but for the fact that it seemed to involve a claim for demurrage under a guarantee or 'undertaking' of performance of the work within time, as opposed to a claim for demurrage under a contractual provision not labelled by reference to a guarantee or undertaking) seems almost on all fours with the present factual situation, require a different conclusion from that reached in the similar situation in Heilbrunn? 132 Zeus, considered without apparent disapproval in Heilbrunn and approved in Gatoil, was a very briefly reasoned judgment on appeal from the County Court of Northumberland in 1888. (It is perhaps not far from the category of case the citation of which was "strongly deprecated" by the House of Lords, as noted in Export Credits Guarantee Department v Universal Oil Products Co [1983] 2 All ER 205; [1983] 1 WLR 399.) In terms of persuasive authority, the considered analysis of Allsop J in the Heilbrunn case is, with respect, entitled to more deference than the decision in Zeus and seems to me more likely to be reflective of maritime practice in the modern business world. 133 I note that reference was also made by Mr Gleeson to Tradhol Internacional SA v Colony Sugar Mills Limited 2009 WL 3929893 (C.A.2(N.Y)) (20/11/09) as being broadly consistent with Zeus and involving an FOB contract for sale of goods. In that case, the Court of Appeals held that the seller had failed to establish a prima facie admiralty claim and was not entitled to an order of maritime attachment and garnishment. The relevant law to be applied as to whether there was a prima facie maritime claim raised issues as to whether a contract including both marine and non-marine elements could be brought within one of the two exceptions to the "mixed contracts rule" - which turned on whether the non-maritime obligations were severable or whether the non-maritime claims were merely incidental to the maritime ones, hence a different context from the question presently under consideration. The court considered that the demurrage clause in a contract for the sale and loading of goods FOB was not the focal point of the contract and that "In the context of the contracts at issue demurrage alone does not raise a claim to which the remaining claims are merely incidental so as to support the second exception to mixed contracts", and held that Tradhol had failed to explain how its demurrage and 'dead freight' claims fitted within the mixed contract prohibition. As I read the decision, the court seems to have proceeded on the assumption that a demurrage claim was a maritime claim but that the remaining claims were not merely incidental to it or severable so as to overcome the problem for Tradhol that the contract contained both maritime and non-maritime elements. If that is the proper conclusion to be drawn from the reasons then it would seem to me to support the view that a claim for demurrage could be seen as having a maritime flavour when linked with a contract for the carriage of goods by sea. 134 Applying the test enunciated in Heilbrunn, had this issue been necessary to determine, I would have held that the claims the subject of the arbitration in this case were maritime claims falling within the Admiralty jurisdiction by reference to s 4(3)(f) of the Act on the basis that the loading of the coal onto the ship was an essential step in the preparation of the vessel for the carriage of goods by sea and, hence, the maritime exception would apply. 135 In the written submissions served for Excel, Mr Gleeson next argued that the Admiralty exception did not apply in any event because the "exclusion agreement" was entered into after the commencement of the arbitration (s 41(1)(d) of the State Act). That submission was based on the arbitration proceedings having commenced on 18 March 2009 (upon receipt of the request by the ICC Secretariat) and the reliance placed by Cargill in its written submissions on the exchange of correspondence in April 2009 as amounting to the arbitration agreement in question. 136 However, in oral submissions before me, Mr Stevenson made it clear that Cargill accepted the contention (which had been made by Excel's lawyers in April 2009) that the reference to arbitration had occurred by virtue of the arbitration agreement itself (not an agreement comprised by the exchange of correspondence) (T8.8). It was conceded (as noted above) that Article 28(6) of the ICC Rules, as adopted by the parties by their arbitration agreement in clause 18.9 of the standard coal trading agreement entered into in 2005, amounted to an exclusion agreement for the purposes of s 40 of the State Act. Therefore, it was contended by Mr Stevenson that the exclusion agreement was not one entered into after the arbitration commenced and thus s 41(1)(d) did not apply. In those circumstances, I did not understand Excel's written submission to the contrary to be pressed but, if it were, it would not have succeeded. 137 Accordingly, had I been satisfied that the State Act applied, I would have determined the second jurisdictional question in favour of Cargill.

[4]

(iii) Have the threshold requirements in s 38(5) of the State Act been satisfied? 138 Having considered the jurisdictional issues, I turn then to whether (had those been found in favour of Cargill) the threshold requirements for the grant of leave to appeal would have been satisfied. As already noted, Cargill is seeking leave to appeal in relation to two issues - the first is as to the construction of clause 7.11.2 of the agreement (namely, whether laytime should have continued until the giving of a force majeure notice irrespective of whether that was a notice compliant with clause 17.2 in terms of its timing) and the second is as to whether laytime was suspended during any time that was not a "Weather Working Day". Could determination substantially affect the rights of one or more parties 139 The first threshold requirement is that the court be satisfied that the determination of the relevant question of law, having regard to all the circumstances, "could substantially affect the rights of one or more parties to the arbitration agreement". Factors relevant to the determination of this question include the quantum of the amount in issue and the relationship between the costs of the appeal and the significance of the question of law to be determined (Westport Insurance Corporation v Gordion Runoff Ltd [2009] NSWSC 245, at [15]; Natoli v Walker (1994) 217 ALR 201, at 9). 140 For Cargill, it was submitted that if its contention as to the construction of clause 7.11.2 were to be correct this would make a substantial difference to its rights as it would then have had an entitlement to demurrage from 8 June (at a rate of USD50,000 per day), rather than only from 25 June 2007. (The additional demurrage charges amount to USD850,000.) 141 Mr Gleeson contended that this submission failed to take into account the effect of the determination made by the Arbitrator as to the estoppel/waiver issues that are not now the subject of any challenge by Cargill. It is said that because of those findings, the determination of neither of the grounds of appeal could now have any substantial effect on the parties' rights. 142 As to the first ground of appeal, the findings to which Mr Gleeson refers are the findings that the force majeure notice was given as early as practicable (para 223(b) of the Partial Award); that clause 17.3 applied and had the effect that laytime was suspended during the force majeure period (in effect, para 223(a) of the Partial Award); and that Cargill was not entitled to resile from the position it had earlier adopted (in February 2008) and seek demurrage for the period from 8 to 21 June 2007 (para 223(c)). 143 As to the second ground of appeal, it is said, first, that any appeal would be futile (because the conclusion as to the weather working day issue was in the context of responding to an alternative argument) and the Arbitrator's finding as to the principal contention, ie that time did not count towards laytime by reason of the force majeure provisions, is not challenged. Thus it is said that whatever the result of an appeal by reference to the alternative "Weather Working Day" argument, the outcome will remain the same by reference to the principal finding). Secondly, it is said that it has been conceded by Cargill that there is no difference in monetary terms if an allowance was not made for wet weather but was made for force majeure. Thirdly, it is submitted that (as per the first ground of appeal) this issue could affect the parties' rights only if Cargill were to be permitted to claim demurrage for the period up to 21 June 2007 and the Arbitrator has found otherwise. 144 (Mr Stevenson concedes, as I understand it, that if leave to appeal is not granted in respect of the first ground of appeal then there is no utility in a grant of leave in relation to the weather working day point.) 145 Turning to the first ground of appeal, it is contended by Cargill that the Arbitrator should have found in all the circumstances that the Iron Bradyn went on demurrage shortly after the commencement of the force majeure period. While there is no challenge to the finding of the period over which force majeure was operative, Cargill's position is that had there been a finding that the vessel was on demurrage as at 0956 hrs on 8 June 2007 then demurrage would have been payable from that time. 146 The interaction between clauses 7 and 17 (which I consider in more detail below) is relevant when considering what would be the effect if, as Cargill contended, the time from the beginning of the interruption did count as lay time. 147 Before the Arbitrator, Excel had claimed (in its Summary of Claimant's Claims, as set out in the Arbitrator's award para 154) that clause 17.3 governed the situation and that it was not liable for damages for delay or failure to perform its primary contractual obligations in the period from 8 to 25 June 2007 (and it sought a declaration to that effect). Clause 17.3, which I set out later in these reasons, made express reference to the counting of laytime (but was subject to the proviso that the affected party had complied with the requirements of clause 17.1). The Arbitrator considered that, although they might have been better expressed, the opening words of clause 17.3 made clear that, in the counting of laytime, delay caused by a force majeure was to be taken into account (at [198]) and that this meant that the running of laytime was suspended during the force majeure period. 148 It is by no means clear, therefore, how a finding that clause 17.3 operated (as the Arbitrator seems to have found) such that laytime (and any liability for delay) was suspended during a force majeure period (provided the notice requirements of clause 17.1 were complied with), would have been reconcilable with a finding that, notwithstanding the commencement of a force majeure period, demurrage was payable for part of that period if a notice under clause 17.2 was not issued immediately the force majeure event occurred and the vessel went on demurrage during the course of the force majeure period. A finding that laytime continued to run from the commencement of the force majeure period (and demurrage was payable once laytime expired early in that period) until the giving of the force majeure notice (and therefore that the Iron Bradyn went on demurrage earlier than 25 June 2007) would seem to be inconsistent with the Arbitrator's finding (para 223(a)) that no demurrage was payable during a force majeure period. 149 Mr Gleeson contended that if leave were to be obtained by Cargill the issue whether there had been an error of law would be immaterial as its counterclaim has already been rejected and there is no attempt by Cargill to seek leave to appeal against the finding of the arbitrator rejecting the counterclaim the whole of which was dismissed (para 224(e)), there being no immediate entitlement to claim demurrage in any event. 150 Mr Stevenson's response was that the Arbitrator's findings in relation to waiver, election and the like are encapsulated in para 139 of the word (namely that Cargill was not then entitled to raise the possibility that Excel had no entitlement to rely on the force majeure provisions of the agreement at all in the relevant period) but that this said nothing as to whether Cargill could raise the question of the proper construction of the force majeure provisions. Mr Stevenson contends that nothing in the Arbitrator's findings justifies the conclusion that Cargill was not entitled to make the Alternative Argument as to the proper construction of clause 7.11.2. 151 If the two findings (ie a revised finding on clause 7.11.2 and the existing finding on 17.3) could not stand together then it would seem that the conclusion reached in relation to Excel's claim for a declaration that amounts had become payable under clause 17.3 would need to be revisited (whether or not that finding had been the subject of a separate challenge) since there would seem to be an inconsistency in saying both that a vessel goes onto demurrage during the force majeure period and that liability for demurrage is suspended in that period. Therefore I am not persuaded that the overall conclusion reached by the Arbitrator as to clause 17.3 necessarily renders futile an appeal on the first ground. 152 However, in my view (leaving aside the clause 17.3 argument) the effect of the Arbitrator's estoppel/waiver finding (which is not challenged) would seem to deprive a finding in relation to the first ground of appeal of much of its effect. At best, Cargill would in those circumstances seem to be limited to a claim for demurrage for the period from 21 to 25 June 2007 (a claim of much less than the USD850,000 figure which Cargill contended would be recoverable if it succeeded on this issue - being a claim of USD250,000 at most, assuming the first and last day of that period are both included in the calculation). 153 I have outlined above the circumstances in which Cargill did not press, as at February 2008, its claim for the so-called "undisputed" amount and reserved its position only in relation to the "disputed" amount. The Arbitrator dismissed the whole of Cargill's counterclaim on the basis that there was an agreement by Cargill to compromise its claim for demurrage and/or waived or was estopped from any claims to demurrage in the period from 8 to 21 June 2007 (paras 142-144). That counterclaim was for the "undisputed" amount referable to the period (from 8 to 21 June 2007 but also, as I understand it, for the "disputed" amount referable to the period from 21 to 25 June 2007. There seems to be nothing in the award to suggest that Cargill had waived or would be precluded from raising the claim for demurrage in that latter period. 154 Therefore, I accept the submission by Mr Gleeson that a re-consideration by way of appeal of the proper construction of clause 7.11.2 will not overcome the problem for Cargill of the estoppel/waiver finding, but that finding seems to me to be confined to any claim for demurrage for the period 8 to 21 June 2007, not the later period. 155 Balancing a claim of that lesser magnitude against what would surely be the limited cost of arguing a discrete construction point before the arbitrator, I would not accept that there could not be a substantial effect on the parties' rights arising from the determination of that discrete issues and thus would have been prepared to conclude that the first threshold requirement was met and that the determination of the question of law posed by the first ground of appeal could substantially affect the parties' rights. 156 If so, then to the extent that the second ground of appeal can be called in aid to support the argument based on the first ground of appeal (as Cargill seeks to do in the manner I consider below), the determination of that question of law may also be said to have the potential substantially to affect the parties' rights (though in an indirect way). However, if leave to appeal is not granted in relation to the first alleged error, then it is not disputed that there would be no utility in granting leave in respect of the second alleged error and thus the first threshold requirement would not be met in that case. Requirement that there be manifest error of law on the face of the record 157 Although I have summarised above the errors said to have been made by the Arbitrator, in considering this threshold requirement (and the alternative argument that there is a strong likelihood that there was an error of law) it is necessary to focus in some detail on how it is said that the Arbitrator has erred in his award. 158 Before so doing, I note that emphasis was placed by Mr Gleeson on the high hurdle confronting a party seeking to establish manifest error of law on the face of an award for the purposes of s 38(5) of the State Act. In Promenade Investments Pty Ltd v State of New South Wales (1992) 26 NSWLR 203, Sheller JA said (at 225):

[6]

… However as McHugh JA pointed out "manifest", in the context of the subsection, which contemplates the grant of leave before an appeal can be pursued, connotes an error of law that is more than arguable. There should, in my opinion, before leave is granted be powerful reasons for considering on a preliminary basis, without any prolonged adversarial argument, that there is on the face of the award an error of law . (my emphasis) 160 For there to be manifest error, the error must be evident or obvious, not something which is reasonably arguable and not something that takes prolonged adversarial argument to deduce. As is the case when considering whether a decision is plainly wrong, it is the quality that bespeaks the error. The fact that I might have come to a different conclusion on a point of construction would not be to the point (as I was reminded more than once, no doubt lest I be tempted to stray down the path of construing the relevant clauses afresh). 161 In that regard, the very fact that the argument as to the construction of the relevant clauses required careful and detailed analysis by Counsel on the hearing before me (and, I should add, has given me pause when considering whether and how the relevant submissions were put to and/or addressed by the Arbitrator) seems to me to compel the conclusion that any error of law which the Arbitrator might have made in construing the respective clauses is certainly not manifest on the face of the award. It is not the case that there was an obvious point which could be said to have been overlooked or misconstrued in the Arbitrator's analysis. Rather, the construction adopted by the Arbitrator in respect of the relevant clauses for the purpose of addressing the question whether demurrage was payable during the force majeure period seems to be one which was reasonably arguable and open for him to find. I set out below the basis on which I have come to that conclusion. Clause 7.11.2 'error' 162 As to the first error, it is said that on the natural and ordinary meaning of clause 7.11.2 the time between the beginning of an interruption for force majeure and the giving of a force majeure notice should have counted as laytime. 163 Clauses 7.11.1 and 7.11.2 provided, relevantly, (with my emphasis) that:

[13]

7.11.6 Notwithstanding the provisions of clauses 7.11.1, 7.11.2 and 7.11.3, once the Vessel is on Demurrage, all time lost (including time lost by reason of Force Majeure) shall continuously count as Demurrage … Cargill's submissions to the Arbitrator 168 The Outline of Submissions, dated 14 August 2009, served by Cargill in relation to the arbitration were contained volume 3 of the Court Book (Exhibit A). 169 The manner in which the clause 7.11.2 submission was put is highly relevant. At para 18 of Cargill's written submissions, Cargill pointed to the fact that the provision in clause 7.11.1 (that time spent or lost on account of force majeure did not count towards laytime) was qualified by the provision that the notice of intention to claim force majeure be given as early as practicable and went on to say that "This requirement that there be no delay in the service of this notice is reinforced by the terms of clause 7.11.2"; and that this provision applied unless the vessel was already on demurrage in which case it would continue to run and be payable by Excel notwithstanding force majeure (clause 7.11.1 and 17.8) (my emphasis). In that submission, it seems to me, the notion that notice be given as early as practicable was equated with the situation of there being 'no delay' in the service of the notice (said to have been reinforced by clause 7.11.2. 170 Cargill disputed not only that the events gave rise to force majeure but also that the notice was in compliance with clause 17.2 "in particular such that laytime would not count from 8 June 2007 or at any time prior to service of that notice" (para 21(b) submissions) and submitted that even if the events amounted to force majeure nevertheless that force majeure period (during which time would not count against laytime) commenced when Excel contended it did or ended when Excel said that it did. 171 Of the issues there identified as requiring determination, Cargill noted that one was whether there had been compliance with the requirement for a valid and effective declaration of force majeure (and, if not, the effect of non-compliance (para 34(b)) and as to whether and to what extent time did not run for the purposes of calculating laytime as a result of the events claimed to amount to force majeure (para 34(c)). 172 At para 40 of its then submissions, Cargill said:

[20]

THE ARBITRATOR: Well, it says pursuant to 17.2. MR NELL: Yes. The point that I'm making, and perhaps I'm not making it clear enough, is that 17.2 requires not only a notice to be physically given but that it be given as early as practicable. If it is not given as early as practicable, then that notice is not a notice pursuant to 17.2 and in those circumstances the first half of 7.11.2 will say that time lost shall count as laytime. If however the notice is given and it is construed as having been given but delayed then the second part of the sentence of 7.11.2 applies, and that is that the delay in giving the notice from the beginning of the interruption up to the time the notice is given is laytime . (my emphasis) THE ARBITRATOR: But assuming that it wasn't given timeously, why wouldn't that second part of the fist sentence of 7.11.2 apply? ( my emphasis) 181 (What is said by Mr Gleeson is thus that any reference to clause 7.11.2 in the submissions made to the Arbitrator was made in the context of the overarching submission that the notice was not given as early as reasonably practicable. Mr Stevenson accepted that this was true to some extent.) 182 Cargill contends that the Arbitrator failed to deal with its argument that, by reason of clause 7.11.2, "any delay" between commencement of the force majeure period and the giving of the notice meant that laytime continued (notwithstanding the commencement of the force majeure period) until Excel gave notice of force majeure in accordance with clauses 7.11.1 and 17.2 of the agreement (and Mr Stevenson submits that, for the purposes of this argument it is irrelevant whether or not that notice was given as early as practicable). 183 Mr Gleeson submitted that the premise on which the Alternative Argument was based was that the fact that notice was not given as early as practicable did not render the notice a nullity but nevertheless still meant that there was a delay in giving of the notice. Thus Mr Gleeson submitted that the premise of both the primary and the alternative argument was that the notice had not been given as early as practicable; whereas the premise of the argument put to me (which Mr Stevenson says was also put to the Arbitrator) was that even if a notice was given as early as practicable there could still be delay for the purposes of clause 7.11.2. 184 As I read the written submissions which were before the Arbitrator, it seems to me arguable that the submission put to the Arbitrator was premised, as Mr Gleeson suggested, on there being a valid notice albeit one not given as early as practicable (as opposed to the argument that there was both a notice given as early as practicable and delay); but that the more straightforward reading of the submission was that advanced by Mr Stevenson. (However, the very fact that there is any serious debate as to how this submission was premised indicates the difficulty for Cargill is establishing any manifest error by the Arbitrator in the dealing by him with this submission.) 185 Accepting that the submission was premised as Mr Stevenson contends, that gives rise to what would seem to be a contradiction in terms - how can there have been a delay if the notice was given as early as practicable? The concept of delay, ordinarily, suggests something more than a mere lapse of time. It suggests that there has been a procrastination or putting off of something that could have happened earlier (see Macquarie Dictionary definition of the word in its usage respectively as verb and noun). It is in this sense of the word that the Arbitrator himself seemed to approach the argument during the course of the hearing, when he raised the question as to whether what was being put to him was that there had been a failure to act 'timeously' and the consequences of that. 186 The semantic argument as to whether there can be an operative concept of delay where a notice has been given as early as practicable does not appear to be one around which there was much debate before the Arbitrator (there seems to have been no suggestion, for example, that if the two concepts were mutually exclusive it might be thought that there was no work left to be done by the words in the second half of the first sentence in 7.11.2). What was not, it seems, made clear to the Arbitrator was that the alternative argument in para 79 of Cargill's written submissions was one that meant that any period of time which elapsed between the commencement of an interruption and the giving of a force majeure event amounted to 'delay' for the purposes of the clause (and the Arbitrator cannot in my view be criticised or accused of a denial of natural justice for having not dealt with that particular argument, albeit that it seems to be the logical extension of what Cargill is now and was then putting). Mr Gleeson thus contends that what has been done in the present application is to re-cast the 'delay argument' as one which means that if there was any gap in time between the occurrence of the force majeure event and the giving of the notice then that is delay and has the consequence that time continues to count towards laytime. 187 Whether or not the alternative argument was articulated as clearly before the Arbitrator as it was before me, the notion that delay could be taken into account for the purposes of laytime even if there had been a valid notice (by which Cargill seemed to be referring to one given as early as possible) seems to me to have been before the Arbitrator. 188 Mr Gleeson submitted that once it was found that notice had been given as early as practicable there could be no operative concept of delay in clause 7.11.2 - in effect that this was a contradiction in terms. (I think there is force in that submission, though the construction of these clauses is not the task before me.) The concept of delay, it was submitted, must be a reference to a notice which was not given as early as practicable (ie in respect of which there has been found to be some delay), in contrast to a notice given as early as practicable. (One might have thought that if any lapse of time was sufficient for the purposes of calculating laytime during a force majeure event then it would have been simple to provide for that expressly, without the need to employ the concept of delay - and that the failure to give a notice as early as practicable would sound in a different consequence (such as any damage resulting from the seller not having been on notice of a claim at an early enough time) rather than one linked to the calculation of laytime (which would, on Cargill's argument, be running in any event up until a notice was ultimately given).) 189 What did the Arbitrator do? 190 The Arbitrator set out the issues he had identified for determination on the reference in paras 65-66 of his reasons. 191 The first issue was the 'disputed amount' of USD 299,822.47 which related to the demurrage claimed for the period 21 to 25 June 2007. The Arbitrator expressly dealt with this on the basis (which he said accorded with the way the parties had dealt with it) of an assumption that there was a relevant event of force majeure attracting the operation of clause 17 and as to whether that had come to an end by 21 June 2007 (as Cargill contended) or 25 June 2007 (as Excel contended). Pausing there, there was no suggestion that Cargill was in any way estopped or precluded from raising its claim for demurrage for this period. If, therefore, the Arbitrator's conclusion as to the construction of clause 7.11.2 was in error, then the finding as to estoppel/waiver would not preclude recovery for that amount. (The Arbitrator found against Cargill on this first issue.) 192 The second issue was whether Cargill was entitled to re-open its claim for the undisputed amount (put by the Arbitrator as 'whether there was force majeure in terms of the Agreement in respect of the period 8 to 21 June 2007). 193 The third issue was as to when the force majeure event commenced. The Arbitrator noted that this was one that arose if the second issue was determined in favour of Cargill (which it was not) but nevertheless seemed to recognise that Cargill might contend it was entitled to raise the substance of the third issue irrespective of the finding on the second issue. (That would presumably only be the case if the commencement of the force majeure period had any relevance to the claim for demurrage in respect of the later part of the force majeure period, which would seemingly arise only when considering how laytime was to run for the purposes of that later claim ie whether, on Cargill's argument, laytime continued to run over the force majeure period such that by the commencement of the disputed period the vessel was already on demurrage. However, it was not suggested before me that there was any significance to be attributed to the Arbitrator's comment in this regard.) 194 The fourth and fifth issues related to what part of the definition of force majeure was to apply and what consequences flowed therefrom and the seventh and eighth related to an argument in relation to clause 17.7 of the agreement, none of which are relevant in the present context. 195 The issue which gave rise to the first alleged error of law was the sixth issue, namely whether Cargill was given the force majeure notice as required by clause 17.2. The Arbitrator addressed this issue from paragraph 199 of his award. He referred to the notification given by Excel under 17.1 (that being distinct from a notice of intention to make a claim of force majeure which is dealt with in clause 17.2). In paragraph 200 the Arbitrator recorded Cargill's (primary) contention, which was that the notice given on 13 June 2007 was not given as early as practicable after the alleged force majeure event occurred (there being an issue in that regard as to whether the requirement that the notice be issued as early as practicable was to be tested by reference to the alleged force majeure event or the formation of an intention to make a claim). The Arbitrator found it unnecessary to determine that issue as he was satisfied that the notice given on 13 June 2007 had been given as early as practicable. (There was no suggestion that it should, or could feasibly have been expected to, have been given simultaneously with the force majeure event.) 196 The Arbitrator noted that clause 17.3 placed importance on compliance with clause 17.1 rather than 17.2 (ie to a notice of the existence of force majeure events rather than of intention to bring a claim) and then said that the significance of that factor might be mitigated by the fact that, when clause 7.11 was applicable, reliance is placed on compliance with 17.2. The Arbitrator there seemed to contemplate that the circumstances in which a party was not liable by reason of force majeure (clause 17.3) had some connection in terms of its operation with the operation of clause 7.11 as to when and how time lost on account of force majeure was to be affected by the giving of notice in relation thereto. 197 What the Arbitrator does not seem directly to have addressed in his reasons (and this is the nub of the criticism now directed by Cargill at the award) is the submission that was put in paragraph 18 of Cargill's submissions (that even if the notice had been given as early as possible, there was nevertheless an operative delay in the issue of that notice and laytime continued during that period). 198 However, apart from the brief reference during argument to the significance of the notice not being given timeously, the manner in which Cargill's alternative submission was put seems to have been put was not expressly linked to the proposition that the lapse of any period whatsoever between happening of a force majeure event and the giving of notice would mean that laytime continued to run. 199 And, insofar as the written submissions referred to the requirement to give the notice as early as practicable being reinforced by the requirement that there be no delay, there is force in Mr Gleeson's submission that the 'delay' argument was predicated on there being a finding that notice was not given as early as practicable (the only distinction between the two arguments being said to be as to whether in that event the notice was a nullity or had some room for operation). 200 Mr Gleeson submits that what the Arbitrator did was to reject the factual premise of the alternative argument (namely that Excel had failed to give the notice as early as practicable) and thus the delay argument failed and there was no error by the Arbitrator (nor any need for him separately to articulate his conclusion in that regard). 201 As the above discussion should illustrate, there were arguments open on both sides in relation to the question as to how clause 7.11.2 should be construed. Insofar as it seems that the Arbitrator formed the view that if notice was given as early as practicable then there was no relevant delay for the purposes of clause 7.11.2, I consider that this was a conclusion reasonably arguable and open for him to find. That being the case, whether or not ultimately it might be said to have been wrong, there was no manifest error of law in the drawing of that conclusion. That disposes of the second threshold requirement for the grant of leave to appeal. Weather Working Day 'error' 202 As to the second error, it is said that the Arbitrator (in accepting the submission of Excel to the effect that the definition of Weather Working Days in the definition of Cargo Handling Rate had the effect that laytime was suspended during any period in which loading was hindered by bad weather) misconstrued the agreement (by treating an integer in the calculation of Cargo Handling Rate, which was necessary to determine the allowable period of laytime, as having a substantive negative operation) and that the Arbitrator impermissibly used the parties' post-contractual conduct as an aid to construction (contrary to Agricultural & Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570, at [35], [163]; Franklins v Metcash, at [10]-[13], [58], [306]-[329]). 203 It was conceded that if leave to appeal on the clause 7.11.2 issue were not to be given, then this issue would not arise. 204 Mr Gleeson noted, by way of background, that the Weather Working Days argument had been raised by Excel as an alternative argument in the eventuality that the Arbitrator did not find that force majeure had started at 8.15am on 8 June 2007 (but found that it had started at some later time on that day). As I understand it, Excel's argument was that if the Iron Braydn came on to demurrage at around 9 o'clock on 8 June 2007 (as Cargill contends), there was nevertheless an allowance to be made in Excel's favour for bad weather and that this operated to reduce the claim for demurrage. 205 The Arbitrator noted Excel's contention in that regard as being that the approach reflected in Cargill's earlier acceptance (that time did not count against Laytime from 7 June 2007 because of bad weather) could also justify a conclusion that Laytime did not run from at least the time from which Excel relied on force majeure. 206 "Cargo Handling Rate" was defined in clause 1.1 to mean the rate, as specified in the relevant specification schedule at which the coal was to be discharged at the Delivery Point "for the purposes of calculating Laytime". The relevant specification schedule stated that the minimum shipment size was to be 15,000 Metric Tonnes and that "the Seller shall load shipment aboard the Vessel at the following average rates per WWD being a day of twenty-four (24) consecutive hours SHINC" (Sundays and holidays included). 207 The Arbitrator noted in his award that, prima facie, the reference to WWD (Weather Working Day) appeared to be an integer in the calculation of a Cargo Handling Rate but he ultimately accepted the contention of Excel that it had a substantive negative operation in that any obligation to load, and the counting of laytime, was suspended during the period when the loading was hindered by bad weather. 208 In coming to a view on this question (which the Arbitrator noted was a difficult issue because in his view the agreement was not very clear in this respect), the Arbitrator expressly had regard, first, to the description of Cargo Handling Rate in the Schedule (which he considered was something more than simply part of a definition - perhaps because it expressed an obligation for the Seller to load the shipment at the specified average rates) and, secondly, to the conduct of the parties "before Cargill sought to resile from its earlier position" (ie their conduct before Cargill reinstated its claim to demurrage for the whole of the period) which he considered suggested that the parties understood that the agreement had the meaning for which Excel contended. 209 Mr Gleeson conceded that the second reason given by the Arbitrator was not strictly a matter referable to interpretation of the contract. Nevertheless, it was said that this was simply a recognition that the parties had acted in a particular way, the Arbitrator having observed that this was a belated submission and seemed to be a response to Excel taking the matter to arbitration. On that aspect, I have difficulty accepting that the Arbitrator's view of the parties' post-contractual conduct was no more than a recognition that the parties had acted in a particular fashion and not a factor which had (in conjunction with the other matter to which reference was made) led the Arbitrator to view the operation of the Cargo Handling Rate definition in the way he did. The Arbitrator explicitly made reference to this as the second of the reasons he had for coming to that view of the definition (para 163) and treated it almost as an admission by conduct (though explaining it in terms of an indication of the parties' understanding of the operation of the clause). In that regard, it seems to me that to the extent that the Arbitrator had regard to post-contractual conduct in construing the definition there was strong evidence of an error of law in so doing. 210 What is not clear is that but for this error the Arbitrator would not still have come to the same conclusion based on the first matter to which he said he had had regard. (Although expressed as one of the two matters to which he had regard, this part of the Arbitrator's reasoning seems to read as if the Arbitrator was drawing some comfort (from the post-contractual conduct) for the conclusion he was proposing to draw on the wording of the definition itself.) 211 If the Arbitrator's conclusion could have been sustained by reference to the first reason set out above, then the fact that one part of the Arbitrator's reasoning could not be sustained might not be to the point. However, it is not clear from the award whether the first reason advanced for treating the definition as having negative operation would have been sufficient, in the Arbitrator's eyes, to stand alone and, in any event, this does not address the issue as to whether the definition could objectively be said to be intended to have any substantive operation in relation to laytime at all. 212 It is submitted by Mr Gleeson that the finding as to the Weather Working Days issue (though apparently conceding that reliance on post contractual conduct would not strictly be correct) was not a manifest error because the approach which the Arbitrator took to the matter was reasonably arguable. Mr Gleeson pointed to the outline given by the Arbitrator of the circumstances in which this issue had arisen (Cargill having initially submitted demurrage calculations with an allowance for bad weather up to a particular time and then from that time basing the allowance on force majeure, but, by the time of the arbitration Cargill had submitted that the earlier demurrage calculation had been mistaken), the Arbitrator's view being that this was a belated attempt to resile from the earlier approach.

[21]

213 As explained by Mr Gleeson, Excel's argument was that the Cargo Handling Rate definition, which included the concept of Weather Working Days, encapsulated the concept that if there was not a usable period of time to load the coal on the ship because of bad weather, that was not taken into account when calculating at what average rate the coal had to get onto the ship. Insofar as the Arbitrator noted that he considered the argument difficult but made a finding which was reasonably open to him to do (whether or not he had acted in error in taking into account subsequent conduct) it is submitted by Mr Gleeson that this does not surmount the high hurdle for manifest error of law. In other words, it is said that if this is reasonably arguable and a question of construction, whether or not the Arbitrator in fact reached the wrong conclusion (and how he did so) is immaterial. 214 Mr Stevenson contended that the relationship between the two alleged errors was that the Arbitrator's failure to consider Cargill's alternative clause 7.11.2 argument led him into error in relation to the weather working point. It is submitted that if the Arbitrator had accepted Cargill's Alternative Argument then that would have given rise to an inconsistency with the proposition that laytime did not run on any day which was not a weather working day, i.e. for some days after 8 June. (Mr Stevenson submitted that the weather working day argument was irreconcilable with the Alternative Argument advanced by Excel.) (In that regard, the Arbitrator does seem to have had regard to the interrelationship between the respective clauses in that he saw the weather working day point as reaching the same outcome as that he had reached on the clause 7.11.2 argument.) 215 It seems to me that the proposition put by Cargill (that WWD was no more than an integer in the definition of the Cargo Handling Rate and thence a step in determining the amount of time to be allowed as laytime) has considerable force but I do not see this as a manifest error of law on the face of the award (as opposed to an issue on which there is strong evidence of error). It seems to me that there were different conclusions reasonably open as to the construction of the relevant definition and its operation in the context of the agreement as a whole. 216 At para 163 the Arbitrator makes it clear that the reliance made by him on the definition argument was as support for his primary conclusion on the construction of clause 7.11.2, saying (after having first concluded that time does not count towards delay from 8.15am on 8 June by reason of force majeure) that: "I would also accept the same result would be achieved by reliance on the concept of weather working days". Mr Gleeson submitted that the finding that loading was hindered by bad weather from 8.15am on 8 June 2007 was a finding of fact. The only question of law was whether, as a matter for construction, whether the Arbitrator should have accepted the proposition that the reference to weather working days had a substantive negative operation in the definition. Mr Gleeson says that is not a manifest error in the sense required by the authorities. I agree. 217 In any event, the Arbitrator's finding on this issue was not ultimately determinative of Cargill's claim. It was an expression of opinion that the same result could have been achieved by a different route. The Arbitrator was of the view that in the circumstances time did not count towards laytime from 8 June by reason of force majeure. The fact that he was also prepared to accept that the same result would be achieved by reliance on the concept of weather working days (paras 162/163) does not take the matter any further. (This, it seems to me, also counts heavily against the exercise of discretion to revisit the issue assuming the basis for such relief were otherwise made out.) Strong evidence of error of law and effect of determination on certainty of commercial law?

[24]

Assuming that there is not a manifest error of law on the face of the award it may be argued that there is strong evidence that the arbitrator made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law. The requirement that the question be one the determination of which may add substantially to the certainty of commercial law indicates that it should be one of wider and greater importance than, for example, the construction of a one-off clause in the context of a particular agreement between the parties. One can discern here the sort of limitation which Lord Diplock had in mind. The expression "commercial law" should be given no narrow construction. The expression "strong evidence that the arbitrator … made an error of law" suggests first what might otherwise be called on the leave application a strong prima facie case and second an error of law not manifest on the face of the award and demonstrable by evidence . (my emphasis) 220 Is there a strong prima facie case that the Arbitrator made an error of law in not holding that the period of time between the occurrence of a force majeure event and the giving of a notice of intention to claim force majeure (whether or not that be as early as practicable) should be counted as laytime? The issues as framed by the Arbitrator did not require a direct determination of that question but it was thrown up by the argument in relation to the adequacy or validity of the clause 17.2 notice. 221 To my mind, both arguments were reasonably available as a matter of construction. As against that contended for by Cargill, it seems to me that had the parties intended laytime to continue after the occurrence of a force majeure event up until the time that a notice of intention to claim force majeure was given (irrespective of whether that notice was given as early as practicable) then there was a very simple way to do so and it would not have necessitated the use of any concept of delay. In that regard, there seems a contradiction in terms between the situation where the notice was given as early as practicable and that where there was in any event an operative delay for the purposes of counting laytime. However, whatever the prospects of success for Cargill's argument on that point ultimately may have been, I am not convinced that there is strong prima facie evidence that the Arbitrator erred in his construction of the clause. 222 As to the second of the alleged errors, for the reasons adverted to above, I would have been inclined to find that the weather working days point was one as to which there was strong evidence that an error of law had been made in this regard (both by reference to the use of post-contractual conduct and by reference to the application of a definition used in context for the purposes of another). On this issue I would have been satisfied that the determination of the construction of clause 7.11.2 and the extent to which it was affected by the reference to Weather Working Days in the definition of Cargo Handling Rate was one which would be likely to add certainty to commercial law. This relates to an issue of construction of clauses in a standard form agreement (not a one-off determination on the facts of this particular case.) Even if its use is not as wide as that suggested by Cargill, the construction of such a clause would in my view have potential significance beyond that of the present case. While the particular form of the agreement in use has changed, the force majeure provisions have not changed in the current version and hence I accept that the validity of the construction put by Cargill is one which would be likely to add to the certainty of commercial law.

[32]

236 There is considerable doubt in my mind is as to whether what was being clearly articulated in the submissions put to the Arbitrator is the proposition for which Cargill now contends, namely that laytime continues to run unless and until a notice of intention to claim force majeure is given (irrespective of whether the notice was given as early as practicable) and that on the proper construction of clause 7.11.2, "delay" in the giving of a notice will occur whenever the notice is not given simultaneously with the force majeure event. There is no suggestion in the Arbitrator's reasons that such a proposition was clearly articulated nor does it emerge clearly from the written submissions (particularly when reference is made to the statement contained in the submissions that the requirement for notice to be given as early as practicable is reinforced by the reference to delay in clause 7.11.2). 237 Although Mr Stevenson submitted that there was no need for Mr Nell, Counsel appearing for Cargill on that application, to make any argument about whether notice was given as early as practicable in order to run the Alternative Argument, the argument was linked in the sense that it was predicated on a determination against Cargill on its principal submission that a notice which was not given as early as practicable was not valid and effective for the purposes of the agreement. 238 Mr Gleeson's submission, as I understand it, on the natural justice issue was that on the clause 7.11.2 argument, there are two possibilities: either Excel is correct in its submission that the argument was not put before the Arbitrator in exactly the way it was put to me (and accordingly Cargill cannot be heard to complain that there was a denial of natural justice by reason of any failure to deal with the argument in the way in which it was put) or, if the argument put to the Arbitrator was, as Excel contends, predicated on there being a notice which was not given as early as practicable (but nevertheless still a valid notice), then the Arbitrator dealt with it and there was no denial of natural justice (even if the Arbitrator may have been wrong). 239 I accept Mr Gleeson's submission that there is nothing in what was put to the Arbitrator which squarely raised the proposition that if the notice is valid and effective (because it was given as early as practicable) clause 7.11.2 nevertheless has the effect that time does not count on force majeure because any gap in time between the objective event of force majeure and the giving of the notice is delay. The proposition that one can satisfy a contractual obligation to do something as early as practicable but at the same time there can be an operative delay was not one that seems to me to have been clearly put to the Arbitrator. 240 If, closely read, the written submissions did go so far, is there anything to suggest that the Arbitrator did not properly consider the argument just because it was not articulated in those terms in the award? The Arbitrator clearly addressed his mind during the course of argument to the question of what consequence might flow from the fact that the notice was not given timeously. Ultimately, his finding was that the notice was given as early as practicable and, by reference to the result which followed from that, he must have considered that there was no delay for the purpose of clause 7.11.2 where there was a notice which had been given as early as practicable. 241 In the circumstances, I am not satisfied that the argument now sought to be put by Cargill was clearly articulated before the Arbitrator. That disposes of the claim that there has been a denial of natural justice. Insofar as a version of the argument was put, it seems to have been heard by the Arbitrator and what he has done is to reach a conclusion which implicitly rejected it. I am not satisfied that this amounts to a denial of natural justice.

Parties

Applicant/Plaintiff:

Cargill International SA

Respondent/Defendant:

Peabody Australia Mining Ltd

Legislation Cited (4)

Commercial Arbitration Act 1984(NSW)

International Arbitration Act 1974(Cth)

Admiralty Act 1988(Cth)

Acts Interpretation Act 1901(Cth)

Cases Cited (56)

CITATION : Cargill International SA v Peabody Australia Mining Ltd [2010] NSWSC 887

Aerospatiale Holdings Australia Pty Ltd v Elspan International Ltd (1992) 28 NSWLR 321 Agricultural & Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570 American Diagnostica Inc v Gradipore Ltd (1988) 44 NSWLR 312 Appleton Papers Inc v Tomasetti Paper Pty Ltd (1983) 3 NSWLR 208 Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 BCCI v Ali [2002] 1 AC 251 Beaufort Developments (NI) Ltd v Gilbert-Ash (NI) Ltd [1999] 1 AC 266 Beveridge v Whitton [2001] NSWCA 6 Bread Manufacturers of NSW v Evans [1981] HCA 69; (1994) 180 CLR 404 British Sugar plc v NEI Power Projects Ltd (1997) 87 BLR 42 CAL No 14 Pty Limited v Motor Accidents Insurance Board [2009] HCA 47; (2009) 239 CLR 269 Carbotech-Australia Pty Ltd & anor v Yates & 14 ors [2008] NSWSC 540 Carcione Nominees Pty Ltd & Anor v Western Australian Planning Commission & Ors [2005] WASCA 56 Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26; (2003) 197 ALR 389; Durayappah v Fernando (1967) 2 AC 337 Eisenwerk Hensel Bayreuth Dipl-Ing Burkhardt GmbH v Australian Granites Ltd [2001] 1 Qd R 461 Equuscorp v Glengallan [2004] HCA 55; (2004) 218 CLR 471 Export Credits Guarantee Department v Universal Oil Products Co [1983] 2 All ER 205; [1983] 1 WLR 399 Farah Constructions Pty Limited v Say-Dee Pty Limited [2007] HCA 22; (2007) 230 CLR 89 Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 Gatoil International Inc v Arkwright-Boston Manufacturers Metal Insurance Co [1985] AC 255 Gett v Tabet (2009) 254 ALR 504; [2009] NSWCA 76 Gordion Runoff Limited v Westport Insurance Corporation [2010] NSWCA 57 Heilbrunn v Lightwood plc [2007] FCA 1518; (2007) 164 FCR 1 Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 CASES CITED : John Holland Pty Ltd aka John Holland Construction & Engineering Pty Ltd v Toyo Engineering Corp (Japan) [2001] 2 SLR 262 Kirk v Industrial Relations Commission of New South Wales [2010] HCA 1; (2010) 262 ALR 569 Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 Mobil Oil Australia Pty. Ltd. v Federal Commissioner of Taxation [1963] HCA 41; (1963) 113 CLR 475 Natoli v Walker (1994) 217 ALR 201 Nishina Trading Co Ltd v Chiyoda Fire & Marine Insurance Co Ltd (The Mandarin Star) [1968] 1 WLR 1325; [1968] 3 All ER 712; [1968] 2 Lloyd's Rep 47 Pacific Carriers v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 Port of Geelong Authority v The "Bass Reefer" (1992) 37 FCR 374 Promenade Investments Pty Ltd v State of New South Wales (1992) 26 NSWLR 203 Raguz v Sullivan [2000] NSWCA 240 Russell v Duke of Norfolk (1949) 1 All ER 109 Sharah v Healey [1982] 2 NSWLR 223 Shell International Petroleum Ltd v Gibbs [1983] 2 AC 375 Smith Ltd v H & S International [1991] 2 Lloyd's Rep 127 Sunport Shipping Ltd v Tryg-Baltica International (UK) Ltd [2003] 1 Lloyd's Rep 138 The "Catur Samudra" [2010] SGHC 18 The Kalliopi A [1988] 2 Lloyd's Rep 101 The Radauti [1987] 2 Lloyd's Rep 276 The Solon [2000] CLC 593 The Queen v Commonwealth Conciliation and Arbitration Commission: ex parte Angliss Group (1969) 122 CLR The Zeus [1888] 13 PD 188 Toll v Alphapharm [2004] HCA 52; (2004) 219 CLR 165 Tradhol Internacional SA v Colony Sugar Mills Limited 2009 WL 3929893 (C.A.2(N.Y)) (20/11/09) Trustees of Henry Smith's Charity v AWADA Trading & Promotion Services (1983) 47 P&CR 607 Westcott v Hahn [1918] 1 KB 495 Westport Insurance Corporation v Gordion Runoff Ltd [2009] NSWSC 245

(c) in any event, Cargill was not then entitled (by reason of the fact that it had reached an enforceable agreement to resolve disputed rights, or had by its conduct waived or would be estopped in equity from asserting any entitlements, in respect of demurrage for that part of the force majeure period) to raise the question whether demurrage was payable in the period from 0815hrs on 8 June 2007 to 1800 hrs on 21 June 2007 (to which I refer as the estoppel/waiver finding); though the Arbitrator went on to say that if Cargill had been so entitled he would have concluded that demurrage was not payable in that period by reference to the conclusion he had already reached in relation to the force majeure period. 4 There is no challenge to any of the Arbitrator's findings summarised in (a) to (c) above (though Cargill does seek to challenge the conclusion that demurrage was not payable during the period of force majeure as so found). Rather, Cargill challenges the Arbitrator's December 2009 award by reference to what is contended to be the Arbitrator's failure to deal (or to deal correctly) with an alternative argument said to have been put by Cargill to the Arbitrator in relation to its demurrage claim. 5 That alternative argument, in essence, is that the period between the commencement of conditions amounting to force majeure (0815 on 8 June 2007) and the giving (at 1348 on 13 June 2007) of a force majeure notice, whether or not that notice had been given as early as practicable (and hence whether or not that notice was a valid and effective notice in compliance with clause 17.2 of the agreement), should have been accepted as counting as "laytime" under the agreement. 6 If that alternative argument were to be correct, then it seems not to be disputed that laytime would have continued to run from 0815 on 8 June 2007 and would have expired not long after that at 0956hrs on 8 June 2007. (On any view, this would mean, on the Arbitrator's findings, that force majeure commenced before, albeit only very shortly before, the expiration of laytime.) Once laytime had expired, the Iron Bradyn would have been on demurrage (and once on demurrage all time lost, including time lost on account of force majeure, continues to count as demurrage). 7 Leaving aside for the present the import of Excel's arguments (which were accepted by the Arbitrator) based on waiver/estoppel or the like, Cargill contends that, had the Arbitrator found that the vessel went on to demurrage as at 0956hrs on 8 June 2007, this would have meant that Cargill's counterclaim for demurrage ran for the whole of the force majeure period from 8 to 25 June 2007. 8 In the present proceedings, Cargill seeks to challenge the Arbitrator's award in one of two alternative ways, depending on the conclusion which is reached as to an initial jurisdictional question, that being whether the arbitration is governed by the Commercial Arbitration Act 1984 (NSW) (the State Act), as Cargill contends, or the UNCITRAL Model Law in accordance with s 16 of the Commonwealth Act, as Excel contends. 9 The first is under the State Act. Cargill seeks leave pursuant to s 38(4)(b) of the State Act to appeal from the award (which requires it to establish that the State Act applies and then to satisfy the threshold requirements of section 38, namely that there was an error of law that substantially affects the parties' rights and either that there has been a manifest error of law on the face of the award or that there is both strong evidence of error and the question is one which is likely to add substantially to the certainty of commercial law). 10 Secondly, if (contrary to Cargill's primary submission) the State Act does not apply, Cargill seeks an order setting aside the award under article 34(2)(b)(ii) of the Model Law, on the basis that the award is in conflict with the public policy of the State due to the failure of the arbitrator to address Cargill's alternative argument (that failure, it is said, amounting to a denial of natural justice). 11 In its Amended Summons in these proceedings, Cargill sought not only leave to appeal but also, if successful in obtaining leave, a determination of the relevant questions of law upon the hearing of that appeal. However, before me it was conceded that it was not appropriate to entertain any appeal in the context of the present application, having regard to what was said by Allsop P (with whom Spigelman CJ and Macfarlan JA agreed) in Gordion Runoff Limited v Westport Insurance Corporation [2010] NSWCA 57, from [103]. Accordingly, the relief now claimed by Cargill (in the event that the State Act applies) is limited to the grant of leave to appeal. 12 I note that it is contended by Excel that, if the Model Law applies, then Article 34 of the Model Law provides the exclusive recourse against an arbitral award in the present case and that Cargill is thus precluded from applying for leave to appeal under s 38(4)(e) of the State Act because that provision is inconsistent with the more limited form of recourse against an arbitral award available under article 34 of the Model Law (and thus the State Act is, to the extent of the inconsistency, invalid by operation of s 109 of the Commonwealth Constitution). It was conceded by Mr Stevenson, though only for the purposes of this application, that if there were found not to have been an agreement between the parties to 'opt out' of the Model Law, then there would be a section 109 inconsistency between the two modes of review and that Cargill could proceed for a review of the Arbitrator's decision only under the provisions of the Model Law. 13 Finally, in the event that the Model Law does apply, and Cargill succeeds on its application to set aside the award, then Cargill requests that the matter be remitted to the Arbitrator pursuant to article 34(4) of the Model Law for a determination by the Arbitrator of what I will refer to as the Alternative Argument. Background Facts 14 The agreement (a standard form agreement developed by an entity known as globalCOAL and of which there have been successive versions since May 2001) was for the delivery, over the period from March 2006 to December 2008, of coal FOB ("free on board") to three specified vessels at the port of Newcastle. (There was some dispute as to the extent to which the SCoTA form of agreement was used in the Australian coal industry in transactions for the sale of coal in and from Australia but it does not seem to be disputed that it is and can be used for the sale of seaborne thermal coal; and that it is so used in a percentage of trading contracts entered into in this country.) The version used by the parties in this case was version 5a (the standard terms of which incorporated all revisions effective as at 0630 GMT on 19 October 2005); however, there has been no subsequent change to the force majeure provisions in the current version of the agreement (hence any determination of a point of construction on the force majeure provisions of the earlier version has potentially wider relevance than for this case alone). 15 The coal deliveries were made by rail. Unfortunately, those deliveries which were due to take place in June 2007 were delayed due to disruption to the rail infrastructure in the Hunter Valley caused by severe storms in that month. The consequential delay in loading and departure of the three vessels in question gave rise to a claim for demurrage by Cargill. For the purposes of the present application, the particular dispute between the parties relates only to the claim for demurrage in respect of the delivery of coal to the MV Iron Braydn. 16 Cargill's claim for demurrage in respect of the late delivery of coal due in June 2007 seems first to have been raised shortly after the coal was in fact delivered in July 2007. Excel relied upon the force majeure provisions of the agreement to deny the claim for demurrage. There was some correspondence between the two entities during the latter part of 2007 and early 2008 in relation to that claim. 17 The Arbitrator, in his award, referred to the communications between Excel and Cargill in relation to that claim from 2007 onwards and expressed the opinion that, as at November 2007, the only matter in issue between the parties in relation to the demurrage claim was whether it extended to the period beyond 21 June 2007. 18 Relevantly, the Arbitrator noted that, by February 2008 (when Cargill issued an invoice for an "undisputed amount" of demurrage, without prejudice to its claim for the balance, which was described as the "disputed amount"), there was no hint that Cargill was reserving to itself an entitlement to claim demurrage for the period extending back before 21 June 2007. The so-called "disputed amount" (in respect of which Cargill had reserved its position at that time) related to the claim for demurrage for the period from 21 to 25 June 2007. It represents the USD amount for which Excel was ultimately successful in the arbitration before the Arbitrator. However in relation to the "disputed amount", the Arbitrator noted (at [7]) that the effect of the correspondence between the parties was that it was accepted that Excel was not liable for demurrage in the period from 8 June to 21 June 2007. (This becomes relevant when considering one of the threshold requirements for the grant of leave under the State Act, as the Arbitrator's estoppel/waiver finding, which is not challenged, has the effect that Cargill is precluded from revisiting any claim for demurrage at least in the period prior to 21 June 2007.) 19 No further steps seem to have been taken by Cargill, whether in relation to the overall demurrage now claimed or for the "disputed amount", until the term of the contract was coming to an end. At that point, when Cargill made payment in respect of the final invoice issued by Excel for the later (2009) coal deliveries it withheld an amount which included the "disputed amount" in respect of the 2007 coal deliveries. Excel then made a claim for short payment of that sum (USD299,882.47), after which Cargill served revised invoices claiming demurrage for the whole of the period from 8 to 25 June 2007. That claim was maintained by it by way of counterclaim in the arbitration (Excel being the moving party in the arbitral proceedings). 20 The Arbitrator noted that in the arbitration proceedings Cargill had put in issue every step which might lead to an entitlement on the part of Excel to rely on the force majeure provisions. The issues before the Arbitrator (which he observed were more numerous than would ordinarily be found in a commercial arbitration involving amounts of the kind there involved) included the time at which the force majeure event had occurred; whether notice of the force majeure event had been given as early as practicable, as required under the agreement; whether, under the agreement, as properly construed, demurrage was payable during a force majeure period; and whether Cargill was estopped or otherwise precluded from then asserting its claim for demurrage. 21 The issue which is the nub of the Alternative Argument (and which Cargill contends the Arbitrator failed properly to address) relates to the calculation of the period of laytime under the agreement and, in particular, whether (after commencement of force majeure) laytime continues to run up until the time at which a force majeure notice (valid or otherwise) is given. As Senior Counsel for Cargill, Mr Stevenson SC, accepted, the logical extension of this argument (if correct) is that unless a force majeure notice is given simultaneously with the commencement of a force majeure event, then laytime continues to run until such notice, valid or otherwise, is given. (By contrast, the effect of the Arbitrator's determination is that if a valid force majeure notice is given in compliance with clause 17.1 of the agreement, then clause 17.3 means that a party does not become liable for demurrage during the period from the happening of the force majeure event the subject of that notice and that the giving of a notice of intention to claim force majeure under clause 17.2 as early as practicable in the circumstances means that time lost on account of force majeure does not count as laytime.) 22 The practical context in which this issue arose was as follows. As noted earlier, the coal was to be delivered on board the Iron Bradyn at the port of Newcastle. The procedure for the delivery and loading of coal involved the giving of a notice of readiness once the particular ship had arrived in port. There was then a period of 'turntime' (12 hours), following which 'laytime' commenced. 23 Laytime (defined in clause 1.1) is the time allowed under the agreement for the loading of the vessel at the delivery point, after which time demurrage (defined in clause 1.1 as the financial compensation payable if the time used in completing loading was longer than laytime) became payable. Under the agreement, laytime was to be calculated by reference to the nominated quantity of coal to be loaded on the vessel according to the formula set out in clause 7.5 (namely, the number of hours or part thereof calculated by dividing the tonnage of the shipment, expressed in metric tonnes, by the relevant "Cargo Handling Rate" expressed in Metric Tonnes per hour). (In that regard, I note that Cargill also asserts that the Arbitrator made an error of law in placing reliance, for the purposes of addressing the argument as to laytime, on the definition of Cargo Handling Rate including its reference to Weather Working Days, a matter I consider in due course.) 24 In respect of the coal to be delivered in June 2007 to the Iron Bradyn, the issue between the parties is now not as to the time of commencement of force majeure (although that was previously in issue); rather the question is whether, in the circumstances, laytime continued to run after the commencement of the force majeure period for the purposes of calculating when Excel became liable for demurrage. 25 It seems to be accepted that, but for the severity of the storms that occurred in early June 2007 and the consequential disruption to the rail infrastructure over most of that month, laytime (the period in which the Iron Bradyn was required to be loaded and after which demurrage would have been payable by Excel) would have ceased (and the Iron Bradyn would have gone on demurrage) at 0956hrs on 8 June 2007. It also seems to be accepted that, had the Iron Bradyn been on demurrage prior to the commencement of force majeure, the operation of force majeure would not have affected Excel's liability for demurrage (it being broadly said that 'once in demurrage, always in demurrage', although there seem to be some exceptions (not material in the present case) to that principle, as identified by the Arbitrator at [170]). 26 Excel gave a notice of intention to claim force majeure of the kind contemplated by clause 17.2 at 1348hrs on 13 June 2007. (It had the day before given a notice of force majeure for the purposes of clause 17.1 and in that regard I note that the agreement contemplated two separate force majeure notices, only the second of which was in contention before the Arbitrator.) Whether the 13 June 2007 force majeure notice had been given as early as practicable for the purposes of clause 17.2 of the agreement was in issue before the Arbitrator, who ultimately found that it had. (Cargill had asserted that the failure to give a notice as early as practicable rendered it of no effect.) 27 As noted earlier, the Arbitrator ultimately found that Excel did not become liable for demurrage in respect of the Iron Bradyn until 25 June 2007 (after the cessation of the force majeure period). 28 Cargill's principal submission in relation to the force majeure notice was that it was not valid or effective, as it had not been issued as early as practicable in the circumstances. It does not seek the challenge the Arbitrator's finding in that regard. It relies now on the alternative submission it says it raised, namely that, even if the notice was not held to be invalid or ineffective, nevertheless the "delay" in its issue was to be taken into account when calculating whether laytime had expired and whether the vessel had gone on demurrage (as Cargill contended) on 8 June 2007. I consider in more detail below the content of the submissions put to the Arbitrator. For present purposes I simply note that Cargill's complaint, in substance, is that the Arbitrator failed to deal at all (or dealt incorrectly) with the Alternative Argument identified now as being to the effect that (irrespective of whether the force majeure notice was a notice compliant with clause 17.2) laytime continued to run until a force majeure notice was given. (As I understand it, this argument requires acceptance of the proposition that a notice given as early as practicable in all the circumstances may nevertheless still be a notice the giving of which was the subject of delay for the purposes of clause 17.2.) 29 Senior Counsel for Excel, Mr Gleeson SC, submits that, to the extent that the Alternative Argument was put to the Arbitrator, it was rejected on the basis that the Arbitrator had concluded that notice was given as early as practicable (and hence, as I understand the submission, it was not necessary for the Arbitrator expressly to consider an argument predicated on a proposition antithetical to such a finding - namely, that there had been a delay in the giving of the notice) (as to which it says there was no manifest error of law) and, alternatively, to the extent that what Cargill is now seeking is to put an argument which was not in fact put (or put clearly) before the Arbitrator, there cannot be said to have been any denial of natural justice in the Arbitrator not having considered or expressly addressed the argument. It is submitted that Cargill was not deprived of a fair hearing of the case as put by it at the arbitration. Issues 30 There are a number of jurisdictional and threshold issues which arise on the present application:

In my opinion the better view is that, by expressly opting for one well-known form of arbitration, the parties sufficiently showed an intention not to adopt or be bound by any quite different system of arbitration, such as the Model Law. It follows that, insofar as Australian Granites relies upon (and succeeded below on) the argument that Article 8 of the Model Law precluded the grant of a stay of the action in favour of Hensel, after delivery of its defence, that view must be rejected. In consequence, the provision of domestic law which governs the right to a stay is s. 7(2) of the Act, quoted above. (my emphasis) 44 Eisenwerk has since been followed by the Supreme Court of Singapore in John Holland Pty Ltd aka John Holland Construction & Engineering Pty Ltd v Toyo Engineering Corp (Japan) [2001] 2 SLR 262. 45 Eisenwerk stands as authority for the proposition that, by expressly adopting a different 'form of arbitration' (there, that being the ICC Rules), parties will be taken to have shown a sufficient intention not to adopt the form or system of arbitration provided for under the Model Law (and that this is sufficient to amount to an opt-out agreement for the purposes of the Commonwealth Act). 46 What the Court of Appeal in Eisenwerk did not appear expressly to address was the question whether, by providing for their disputes to be settled by arbitration in accordance with the ICC Rules, the parties had done any more than to adopt a particular set of arbitral rules, rather than the lex arbitri or curial law as the law governing any such arbitration. 47 It is the conceptual distinction between the lex arbitri and the procedural rules of an arbitration on which Mr Gleeson bases his primary submission that the decision in Eisenwerk is plainly wrong and should not be followed by this Court. Mr Gleeson submits that where the Queensland Court of Appeal erred in Eisenwerk was that it was not taken to, or failed to appreciate, the critical distinction between the lex arbitri or curial law governing an arbitration (which, if the seat of arbitration is within Australia is likely, unless excluded by the parties, to be the Model Law) and the procedural rules of the arbitration (which may be chosen by the parties themselves as a matter of contract to govern the operation of the arbitration itself). (The Queensland Court of Appeal does appear, however, to have been taken in argument to the fact that the provisions of the Model Law were capable of being varied by agreement between the parties and that the ICC Rules were capable of applying as a partial modification of the Model Law, leaving untouched other provisions of the Model Law such as the recognition and enforcement provisions - at least so far as reference is made to the summary report, appearing in the published reasons, of Counsel's submissions on that appeal.) Deference to be accorded to Eisenwerk decision 48 The need for me to be convinced (in order to accept Mr Gleeson's submission that Eisenwerk should not be followed) that the conclusion reached in Eisenwerk is plainly wrong arises from the deference that I am bound, as a first instance judge, to accord to decisions of intermediate appellate courts and, here, to the interpretation there placed on s 21 of the Commonwealth Act by the Queensland Court of Appeal and its application having regard to the clause there being considered. The High Court in Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485, at 492, has said that:

[U]niformity of decision in the interpretation of uniform national legislation … is a sufficiently important consideration to require that an intermediate appellate court -- and all the more so a single judge -- should not depart from an interpretation placed on such legislation by another Australian intermediate appellate court unless convinced that that interpretation is plainly wrong. 49 To similar effect was the statement in Beveridge v Whitton [2001] NSWCA 6, by Heydon JA (as his Honour then was), with whom Mason P and Powell JA agreed, applying that approach also to well-considered dicta of intermediate appellate courts, at [30]. 50 In Gett v Tabet (2009) 254 ALR 504; [2009] NSWCA 76, the Court of Appeal considered (at [274]-[293]) the meaning of the phrase "plainly wrong", in the context of the question as to when an intermediate appellate court ought to depart from its own decisions in relation to a matter of common law. At [283], the Court (comprised of Allsop P, Beazley and Basten JJA) noted that the adverbs "plainly" and "clearly" in the context "bespeak the quality of the error or the level of conviction of error that must be perceived" (and do not limit the circumstances of departure from previous authority to those in which the error is patent or obvious or easily perceived). Their Honours concluded (at [294] - [295]):

The phrase "plainly wrong" (or any like phrase) tends to focus attention on the jurisprudential nature and character of the error and underlying principle or course of authority or the conviction as to the existence of the error. Factors considered by Aickin J in Queensland v Commonwealth and in the joint judgment in John , on the other hand, suggest that there are other considerations bearing on the question as to whether the earlier decision should be overruled, error having been exposed to the requisite degree of conviction. These considerations are properly invoked because they are relevant to the underlying principles of certainty, predictability and transparency upon which the theory of precedent is founded. As explained by Nettle JA in RJE (at [104]), there must be "compelling reasons" for departure from earlier authority, whether in the same court or in a court of co-ordinate jurisdiction, a phrase encompassing both jurisprudential and practical considerations. 52 The position stated in Marlborough was reiterated in Farah Constructions Pty Limited v Say-Dee Pty Limited [2007] HCA 22; (2007) 230 CLR 89 (where the High Court also emphasised the need for regard to be had to "long-established authority and seriously considered dicta of a majority of this Court", at [134]). (In CAL No 14 Pty Limited v Motor Accidents Insurance Board [2009] HCA 47; (2009) 239 CLR 269, at [50], the High Court rejected the suggestion that Farah had altered the doctrine of precedent (in a different regard) by expanding the principle in Marlborough to the common law generally (the application of the relevant principle to the common law being well-established).) 53 In Justice Heydon's article "Limits to the Powers of Ultimate Appellate Courts" (2006) 122 LQR 399, at 415 n 114), when considering the factors which may affect the weight to be attributed by an ultimate appellate court to its own dicta, Justice Heydon referred, among other things, to various circumstances in which that dicta may have fallen from the court otherwise than in the course of considered argument on the point. By analogy, the weight to be accorded to the conclusion in Eisenwerk may potentially be affected by the fact that it does not appear from the court's reasoning that attention was drawn to the distinction between the lex arbitri and the procedural rules of an arbitration, as such. Other authorities 54 In his submissions, Mr Stevenson noted that there has been no demur by other courts to the reasoning in Eisenwerk (though having been cited on seven or eight occasions on other points); that there is no judicial expression of opinion that it is wrong; and that there is no example of any court in Queensland or any other State refusing to follow it. Nevertheless, I was not taken to any authority in which the question as to whether Eisenwerk should be followed in this respect had been expressly argued before the court and hence had been the subject of considered review.

64 Apart from the express recognition in the Model Law that the parties may choose the procedural rules of a particular institution (Articles 2(a) and (d) of the Model Law) and hence contemplates that another institution may have a procedural role to play in the conduct of the arbitration, the Model Law reserves to the court the power to intervene where an institution fails to perform its procedural function and thus contemplates that the Model Law may have a supervisory or supplementary role over and above the role accorded to other institutions by reason of the parties' contractual choice of rules. In this regard, Mr Gleeson referred to the procedure for the appointment of arbitrators outlined in Article 11(4)(c) of the Model Law. 65 As the parties' freedom to choose the procedural rules governing the arbitration is expressed by Article 19 to be subject to any mandatory provisions of the Model Law, Mr Gleeson submitted that the parties' choice of procedural rules cannot of itself constitute 'opting out' of the Model Law for the purposes of s 21 of the Commonwealth Act and that the choice of procedural rules does not involve the parties selecting any alternate law (such as the lex arbitri) under which their dispute will be resolved. 66 It seems to me that the critical distinction is as to whether the opt out provision contemplated by s 21 is one which focusses on the adoption of the Model Law as the lex arbitri or simply as the source of the procedural rules for the arbitration. In its terms, clause 18.9 of the arbitration agreement in the present case expressly focusses on the adoption of particular procedural rules (by reference to the ICC Rules, those being of a procedural nature). That does not necessarily involve any adoption of a different system of law as the lex arbitri (which, as explained in Dicey, Morris and Collins, The Conflict of Laws, Sweet & Maxwell, 2006, at [16-035], is the law chosen by the parties to govern arbitral procedure that is, the procedural law of arbitration (at [16-039]) from that which would apply under the Model Law, nor is it inconsistent with the application of the Model Law as the lex arbitri. (This is also referred to as the 'curial law' of the arbitration (see Mustill and Boyd, Commercial Arbitration, 2nd edn, Butterworths, 1989, at 64). Ordinarily, the lex arbitri is that of the seat of the arbitration for the reasons noted in Raguz v Sullivan [2000] NSWCA 240, where Spigelman CJ and Mason P (with whom Priestley JA agreed) said at [93]:

The seat of arbitration is not necessarily where it is held, although where the parties have failed to choose the law governing the conduct of the arbitration it will prima facie be the law of the country in which the arbitration is held because that is the country most closely connected with the proceedings: see James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583 at 607, 609, 616; Black Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AG [1981] 2 Lloyd's Rep 446 at 453-454; Bank Mellat v Helliniki Techniki SA [1984] QB 291 at 301. 67 Recently, Dicey and Morris in their updating companion (October 2009) to the 2006 edition, have stated (affirming the position that parties can choose procedural rules different to the seat of the arbitration) (at [16-034]) that:

My duty in these circumstances, as I conceive it, is to decide for myself, invidious task as that may be, what the relevant principles are or should be, obtaining such assistance as I can from the persuasive authorities to which I have referred . In this connection I refer to what I said in Sharah v Healey [1982] 2 NSWLR 223, at 227, 228 [namely that it is the duty of this Court to apply the law as (rightly or wrongly) it finds it to be, not as another court states it to be in a manner by which this Court is not bound], and to the passage from the speech of Lord Dunedin in Leeds Industrial Co-operative Society Ltd v Slack [1924] AC 851, there quoted. (my emphasis) 90 It seems to me that my duty, notwithstanding that this is an application for leave to appeal, is to consider the application of Eisenwerk on the question as to whether there should be found (by referral of the dispute to arbitration under the ICC Rules) to have been an implied agreement of the parties to opt out of the Model Law - that being a necessary question to determine in considering the first of the jurisdictional issues posed before me. In circumstances where there is a doubt as to how far, if at all, the relevant arbitration clauses can be distinguished (and it was submitted for Cargill that they were relevantly indistinguishable) it seems to me (consistent with my duty) necessary that I must form a view on the correctness of the decision in Eisenwerk. 91 The conclusion to which I have come is that the decision does not properly recognise or give effect to the distinction between the lex arbitri and the procedural rules governing an arbitration. I am not satisfied that there is any inability to reconcile the application of the Model Law with the adoption of the ICC Rules as the procedural rules to govern the conduct of the parties' arbitration. Accordingly, insofar as Eisenwerk is authority for the proposition that the adoption by the parties of procedural rules (such as the ICC Rules) to govern the conduct of the arbitration of their disputes amounts of itself to an implied agreement to opt out of the Model Law (and while conscious of the respect to be accorded to decisions of an intermediate appellate court such as this), I have formed the view that that decision is plainly wrong and is one which should not be followed by this Court. Is there otherwise an effective opting-out of the Model Law? 92 Mr Stevenson submitted that, even if I were to form the view (as I have) that Eisenwerk is plainly wrong and should not be followed in this case, the objective intention of the parties must have been to exclude the Model Law since the parties (represented as they have been by experienced practitioners in this area) should be taken to have intended (knowing the effect of the Eisenwerk decision as it applied at the time) to opt out of the Model Law for the purposes of s 21 of the Commonwealth Act. This submission is put on the basis that the proper construction of a contract is to be determined by what a reasonable person in the parties' position would have understood it to mean in the circumstances existing at the time of the contract's execution (reliance being placed in that regard on Pacific Carriers v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451, at 461-462; Equuscorp v Glengallan [2004] HCA 55; (2004) 218 CLR 471, at 483; Toll v Alphapharm [2004] HCA 52; (2004) 219 CLR 165, at 179; Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407, at [14]; [305]; [322]). 93 Thus, Mr Stevenson submits that the contracting parties should be taken to have known, when entering their agreement in 2005, the effect of their adoption of the ICC Rules, by reference to what had been decided in Eisenwerk in 1999 (and reported in the authorised reports from 2001) (BCCI v Ali [2002] 1 AC 251; Lewison, The Interpretation of Contracts, 4th edn, Sweet & Maxwell, London, 2007, at [4.06]). That being part of the common law of Australia (Kirk v Industrial Relations Commission of New South Wales [2010] HCA 1; (2010) 262 ALR 569, at [99]), it is said that any party wishing to avoid the effect of Eisenwerk could easily have done so (say, by noting in the arbitration agreement that the Model Law is to apply notwithstanding the adoption of the ICC Rules or by noting that the parties are not to be taken to be entering into an agreement to opt out of the Model Law for the purposes of s 21 of the Commonwealth Act). Not having done so, it is submitted in effect that the parties should be taken to have intended the result which would have followed had Eisenwerk been correctly decided and followed in this Court. 94 In response, Mr Gleeson emphasised that "opting out" means "real opting out" and noted that the standard form contract entered into by the parties in 2005 was the then version of a form of agreement in place before the Eisenwerk decision was reported. It is submitted that there was no settled practice or procedure arising from the Eisenwerk decision per se and that, having regard to the comment and discussion on that case, one could not say that it was accepted as a general principle that the proper construction of s 21 would always lead to the conclusion that choice of arbitral rules of an institution is an opting out of model law. 95 In the absence of a settled practice, and any evidence of any shared or mutual intention of the parties to opt out of the result in Eisenwerk, Mr Gleeson argued that reliance on Lewison did not avail Cargill. In that regard, I would have been inclined to think that experienced practitioners in the area of arbitration would have been well aware by 2005 of the risk that, by reference to Eisenwerk, an adoption of ICC Rules might lead to the conclusion that they had opted out of the Model Law and to have made express provision to indicate (if that be the case) that that was not the intention. The fact that a standard form of contract, the subject in its various iterations of copyright from an earlier date, had been used does not seem to me to detract from such a conclusion. 96 Whilst the House of Lords in BCCI v Ali did not expressly consider the relevance of case law upon the interpretation of contracts, Lord Hoffman did there make the following observations (at [37]-[39]):

The background is however very important. I should in passing say that when, in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 913, I said that the admissible background included "absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man", I did not think it necessary to emphasise that I meant anything which a reasonable man would have regarded as relevant . I was merely saying that there is no conceptual limit to what can be regarded as background. It is not, for example, confined to the factual background but can include the state of the law (as in cases in which one takes into account that the parties are unlikely to have intended to agree to something unlawful or legally ineffective) or proved common assumptions which were in fact quite mistaken. But the primary source for understanding what the parties meant is their language interpreted in accordance with conventional usage: "we do not easily accept that people have made linguistic mistakes, particularly in formal documents". I was certainly not encouraging a trawl through "background" which could not have made a reasonable person think that the parties must have departed from conventional usage. 97 Statements to this effect had been made by Lord Hoffman previously in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, at 912; [1998] 1 All ER 98, at 114. Both cases have been cited by the High Court in Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181, where the following observations were made by Gleeson CJ, Gummow and Hayne JJ (at [11]): Interpretation of a written contract involves, as Lord Hoffmann has put it : 'the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract'. That knowledge may include matters of law, as in this case where the obtaining of intellectual property protection was of central importance to the commercial development of Mr Allen's ironing board (my emphasis, citations omitted). 98 Lewison refers to the decision of Scrutton LJ in Westcott v Hahn [1918] 1 KB 495, at 511, where his Lordship said:

Even if one might consider that the parties to the contract themselves might not have had the previous decisions of the Courts in mind when making their contracts, their lawyers will have done so in deciding whether or not to pursue a dispute subsequently. citing The Radauti [1987] 2 Lloyd's Rep 276 CA; The Kalliopi A [1988] 2 Lloyd's Rep 101; The Solon [2000] CLC 593 as authority for this proposition. 101 However, the comment is also made in Lewison (at 103, of the 3rd edn) that where an erroneous decision has departed from orthodoxy, and a contract is entered into while the erroneous decision was thought to represent the law, that will not provide a reason for applying the erroneous decision to the contract in question, there citing Shell International Petroleum Ltd v Gibbs [1983] 2 AC 375; Trustees of Henry Smith's Charity v AWADA Trading & Promotion Services (1983) 47 P&CR 607. 102 Shell International supports the view that, simply because contracts may have been drafted on the assumption that a specific legal interpretation of a phrase made in a case is good law and binding, a court will not necessarily be precluded from later overruling a particular interpretation placed upon that phrase (at 390 - 391). There, the House of Lords in considering the meaning to be attributed to a particular phrase in a contract, considered whether an earlier decision (Nishina Trading Co Ltd v Chiyoda Fire & Marine Insurance Co Ltd (The Mandarin Star) [1968] 1 WLR 1325; [1968] 3 All ER 712; [1968] 2 Lloyd's Rep 47) construing the same phrase in a manner differently from that which their Lordships considered was the correct interpretation should be overruled despite the uncertainty that may be created in relation to agreements drafted on the basis of or with the interpretation placed on the phrase by the erroneous decision of The Mandarin Star in mind. 103 Lord Roskill was of the view that, despite the uncertainty created in relation to contracts drafted on the assumption that The Mandarin Star was good law, this was not (although it could be in other cases) a relevant consideration when determining whether to overrule the decision. It should be noted that in Shell International, the House of Lords did not expressly consider whether it should, despite the overruling of and subsequent non-application of the erroneous legal interpretation made in The Mandarin Star, nonetheless conclude that such an interpretation was intended by the parties (who would have known of the interpretation and by adopting such a phrase might have impliedly intended that such an interpretation apply). It was submitted before their Lordships that it should be taken that the parties intended the decision to apply to the contract, on the basis that it was assumed to be good law and because no steps had been taken by relevant commercial bodies to change the standard form contract adopted. However, Lord Roskill dealt with this submission not by considering what the objective intention of the parties would have been by adopting the particular phrase in question (that is whether it could be said that they intended the interpretation to apply in circumstances where they did not take steps to draft the phrase differently to avoid its application) but instead dealt with this submission as an appeal for promoting commercial certainty by not overruling the erroneous decision (The Mandarin Star) in question, (which submission was not accepted). 104 While Lewison cites this case as authority for proposition that where a contract is entered into assuming that decision correctly represents the law, that will not provide a reason for applying the erroneous decision to the contract in question (which can be implied from the outcome of the decision, although not the express reasoning), it might perhaps be more precise to read Shell International as authority for the proposition that the fact that a contract has been drafted assuming the correctness of a decision will not necessarily prevent the courts from finding that the decision is incorrect (and as a consequence to refuse subsequently to apply the erroneous decision to the interpretation of the contract). That was the approach of Sir John Donaldson MR in The Mandarin Star, who rejected an argument of this kind as follows:

When a contract has been professionally drawn … the draftsmen is certain to have in mind decisions of the courts on earlier editions of the clauses. Such decisions are part of the context or background circumstances against which the particular contract falls to be construed. If the draftsmen chooses to adopt the same words as previously construed by the courts, it seems to me to be likely that, other things being equal, he intends that the words should continue to have the same meaning. 107 While it might be difficult to say that a "settled practice" of draftsmanship had arisen following one judgment (Eisenwerk) in Australia in which the construction of a particular clause seems to have been addressed, I think it might well be said that the apparent notoriety within arbitral circles of the decision in the period at least from 2001 was likely to have given rise to an awareness on the part of lawyers advising their clients on contracts containing arbitration clauses of this kind of the prudence of ensuring that any doubt as to the parties' intentions in respect of the lex arbitri should be removed (and I see no reason to think that the practice would have differed where what was in consideration was a standard form contract). 108 That said, the force of Mr Stevenson's submission depends on the similarity (or otherwise) between what I might refer to as the Eisenwerk clause and the clause adopted by the parties in their agreement. It seems to me that this is where the argument fails. 109 While I would have been inclined (had the clauses mirrored each other in all relevant respects) to infer that reasonable parties in the position of Cargill and Excel, knowing the law and acting on the advice of the experienced solicitors, must have intended to exclude the Model Law when they chose a form of arbitration agreement relevantly the same as that construed in Eisenwerk and did not take steps to ensure that the result in that case was avoided in their case, the fact is that here the parties adopted a clause which uses somewhat different terminology (referring their disputes for arbitration under the ICC Rules, not providing for the settlement of their disputes in accordance with those Rules). It seems to me that I cannot properly draw the inference for which Mr Stevenson contends in light of that difference, which I see as more than a mere semantic difference but as having potential substance (insofar as the emphasis to referral of the arbitration to take place under particular rules, in the present formulation, in my mind highlights the very distinction between procedural rules and the overriding role of the lex arbitri which I consider was not taken into account in Eisenwerk). 110 Therefore, I have concluded that there was no implied agreement between the parties to opt out, for the purposes of s 21 of the Commonwealth Act, of the Model Law nor is any such intention to be inferred from the fact that the parties chose to adopt an arbitration clause similar to that which had been used in Eisenwerk at a time when the potential consequence of using such a clause should have been well known to those practising in the area of international arbitration. 111 The answer to the initial jurisdictional issue, therefore, is that the Model Law applies. Strictly speaking, that means that the balance of the issues in relation to the application for leave to appeal under the provisions of the State Act do not arise. However, they were argued before me and I address them as follows. (ii) Does the claim arise out of a maritime contract? 112 The second jurisdictional issue arises from the provisions of the State Act under which leave to appeal may be granted in respect of questions of law arising out of arbitral awards. Subject to subs (4), s 38(2) of the State Act confers a right to appeal to this Court on any question of law arising out of an award. In the absence of consent of all other parties, an appeal can only be brought with the leave of the court (s 38(4)(b)) and the grant of leave is subject to s 40, which provides that the court shall not grant leave to appeal with respect to a question of law arising out of an award if there is in force an exclusion agreement, that being defined as being an "agreement in writing …between the parties to the arbitration agreement which excludes the right of appeal under section 38(2) in relation to the award…" 113 Section 40(3) provides that an agreement may be an exclusion agreement for the purposes of the section whether or not it forms part of the arbitration agreement. Mr Gleeson noted (and Mr Stevenson accepts) that Article 28(6) of the ICC Rules in its terms amounts to an exclusion agreement for the purposes of the Act and hence that, by the submission of the dispute to arbitration under the ICC Rules, there was an exclusion agreement. 114 Pursuant to s 41(a), an exclusion agreement shall have no effect in relation to the award or question where the award or question of law arising in the course of the arbitration relates in whole or in part to a question of claim falling within the Admiralty jurisdiction of this Court. Accordingly, to avoid the effect of the exclusion agreement, the Cargill needs to establish that the claim before the Arbitrator was a maritime claim. 115 Section 9(1) of the Admiralty Act 1988 (Cth) confers jurisdiction on this Court, amongst others, in respect of maritime claims. A reference to a maritime claim is a reference to a proprietary maritime claim or to a general maritime claim. The latter includes (s 4(3)(f)) "a claim arising out of an agreement that relates to the carriage of goods or persons by a ship or to the use or hire of a ship, whether by charterparty or otherwise". 116 Reliance was placed by Mr Stevenson relies on Heilbrunn v Lightwood plc [2007] FCA 1518; (2007) 164 FCR 1 for the submission that the claim brought by Cargill for demurrage under a contract for the delivery of coal FOB to a ship (for the subsequent carriage of the coal by ship) was a maritime claim (and hence the exclusion clause is overridden). Mr Gleeson relies, inter alia, on The Zeus [1888] 13 PD 188 for the contrary conclusion. 117 It is accepted that the relevant test in determining whether there is a maritime claim is that applied in Heilbrunn - the 'reasonably direct connection' test, namely whether there is a reasonably direct connection between the claims made and an agreement for the use of a ship or the carriage of goods by ship. In this case, as outlined earlier, the claims made in the arbitration were for payment due in respect of the delivery of goods to a ship and a counterclaim for demurrage for delay in loading the ship. 118 In Heilbrunn, Allsop J (as his Honour then was) was considering whether a claim, against a warehouseman in England, for damage which occurred when a vintage car was loaded into a sea container to be transported by road to the port of Tilbury for loading on a ship for sea carriage to Australia was a maritime claim within the Admiralty jurisdiction under the Act. His Honour held that it was. In essence, his Honour considered that the agreement to load a shipping container was sufficiently directly related to the anticipated carriage of goods by sea to satisfy s 4(3)(f), at [52]-[54]. The agreement under which the claim was made was for the loading of the sea container which was then to be to the port and then by sea to Australia. 119 By contrast, in The Zeus, to which his Honour referred to in Heilbrunn, the claim was made under what was described as an undertaking (by way of guarantee) by a colliery company to load a cargo of coal onto a ship within a particular period (and thereafter to pay demurrage). That claim was held not to be an agreement "made in relation to the use or hire of any ship, or in relation to the carriage of goods in any ship" within the meaning of the County Courts Admiralty Jurisdiction Amendment Act 1869 (32 & 33 Vict. c.51). The agreement was characterised as "merely an engagement to deliver coals at a particular place" with a penalty to be paid if the contract was not performed within a limited time. The use of the word 'demurrage' was said to be immaterial (when considering whether this was a claim having the necessary relationship to the use or hire of or carriage of goods in a ship), it being a word of different meanings, "… unless it can be established that the agreement is one in relation to the use or hire of a ship". Admiralty jurisdiction was there found not to have been established. 120 As is apparent, the present facts are broadly analogous with those in both Heilbrunn and Zeus in that (as in Heilbrunn) the coal was to be delivered by Excel on board a ship for the purpose of its carriage by sea (albeit that it was not being loaded into a sea container as such but was being transported by rail for delivery over the ship's rail) and the claim (as in Zeus) was for demurrage by reference to the delay in loading the ship. 121 In Heilbrunn, Allsop J said from [22]: The relevant question to address is whether the assertions of right or interest recognised by law and carrying an entitlement to relief made by the plaintiff in the application and statement of claim (being the claim of the plaintiff) have (and has) the legal character of that which is set out in s 4(3)(f): Owners of Shin Kobe Maru v Empire Shipping Co Inc (1994) 181 CLR 404 at 422 and 426; and The 'Global Peace' 154 FCR at 459-60 [73]-[76].

Mr Cutler argued that the correct approach to the interpretation of s 4(3)(f) could be found in Port of Geelong Authority v The 'Bass Reefer' (1992) 37 FCR 374 at 380-382 in which case Foster J adopted the approach of Lord Keith of Kinkel in Gatoil International Inc v Arkwright-Boston Manufacturers Mutual Insurance Co [1985] AC 255 at 270-271 and said that the relationship connoted by the words "that relates to" in s 4(3)(f) must be "some reasonably direct connection". The same passage from Lord Keith's speech in Gatoil [1985] AC at 270-271 was cited with apparent approval by Gummow J in Empire Shipping Company Inc v Owners of the Ship 'Shin Kobe Maru' (1991) 32 FCR 78 at 95 (at first instance).

I should apply The Antonis P Lemos [1985] AC 711 in this regard. All the reasoning of Lord Brandon is equally applicable to s 4(3)(f). I would only add the following remarks. Given the need for the 1952 Convention to apply to a wide variety of legal systems and given the capacity of maritime claims to arise by reference to chartering and carriage arrangements often of some complexity, it would make little practical sense to limit the types of claims to which this paragraph was directed to contractual claims between parties to the agreement. Secondly, the provision is one in which jurisdiction is given to a court. It should be read liberally: The Shin Kobe Maru 181 CLR at 421. Thirdly, The Antonis P Lemos [1985] AC 711 was recently applied by a Full Court of this Court, though in a different context: that of construing an arbitration clause containing the phrase "arising out of", in Comandate Marine Corporation v Pan Australia Shipping Pty Limited (2006) 157 FCR 45 at 45 at [171]. The Full Court, though in that different context, gave the same wide meaning to the phrase "arising out of"': Comandate Marine v Pan Australia 157 FCR 45 at [162]-[176]. 123 Accordingly, a liberal view should be taken in determining when a claim arises out of an agreement but the second part of the test is whether that agreement has a reasonably direct connection with the carriage of goods by sea and a narrower view is taken on that aspect. In Heilbrunn, Allsop J said of this question, from [44]:

It is also be noted that in The Antonis P Lemos [1985] AC at 730 Lord Brandon expressed the view that what "tilted the balance in favour of giving a narrow meaning to the expression 'relating to'" was the existence of two authorities, The Zeus (1888) 13 PD 188 and The Aifanourios [1980] SC 346 (the reasoning in which latter case can be seen as contrary to some of the comments of Lord Brandon about the natural and inevitable overlap in the list of maritime claims). Lord Brandon said (at [1985] AC at 730 G-H) that in the absence of these authorities it might not be right to give the expression "relating to" (in s 4(3)(f) "relates to") a narrow meaning as given by the House in Gatoil [1985] AC 255.

[2005] WASCA 56

[2009] NSWCA 76

(1992) 28 NSWLR 321

(2008) 238 CLR 570

(1988) 44 NSWLR 312

(1983) 3 NSWLR 208

(1993) 177 CLR 485

(1994) 180 CLR 404

(2009) 239 CLR 269

(2003) 197 ALR 389

(2004) 218 CLR 471

(2007) 230 CLR 89