Hui v Esposito Holdings Pty Ltd [2017] FCA 728 | Case summary

The following parts of the partial award made on 12 September 2016 be set aside: (a) in paragraph 1, the word "only", which is implied between the words "subject" and "to"; (b) in paragraph 3, the word "only", which is implied between the words "subject" and "to"; and (c) subparagraphs 4(b), (c) and (d).
Paragraph 1 of the partial award made on 15 September 2016 be set aside.
The mandate of the arbitrator be terminated.
There be liberty to apply within 28 days in the event that the parties have not agreed on the appointment of a substitute arbitrator.
The first respondent pay the applicant's costs of the proceeding on a party-party basis.
The first respondent pay the second and third respondents' costs of the proceeding on a party-party basis. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BEACH J: 1 On 9 June 2017, I delivered my reasons in these two proceedings (Hui v Esposito Holdings Pty Ltd [2017] FCA 648) and directed that the parties file and serve minutes of proposed orders and short submissions directed to the relief giving effect to those reasons. The present reasons are to be read with my earlier reasons. 2 In my earlier reasons, I proposed that I would set aside relevant aspects of the first partial award and aspects of the second partial award. Having now considered the further submissions of the parties, I propose to make orders substantially to the effect of Esposito's submissions, which were largely in agreement with Hui's submissions save as to one aspect concerning paragraph 3 of the first partial award. I have rejected the approach of UDP and 5 Star Foods, which in some respects was opportunistic. This is a characterisation, not a criticism. 3 Let me begin with a few general themes. 4 First, I have power under art 34 of the UNCITRAL Model Law to set aside part of an award. 5 Second, an award consists of both its express provisions and its implications. By analogy with contractual theory, an implication arising from the proper construction of an award is as much part of the award as any provision couched in express language. To hold otherwise is conceptually incoherent if not a hermeneutical heresy. 6 Third, in the first partial award it is apparent that the arbitrator can be taken to have intended, on any reasonable construction thereof, that: (a) the word "only" was to be implied between the words "subject" and "to" in paragraph 1; and (b) the word "only" was to be implied between the words "subject" and "to" in paragraph 3. 7 If I set aside the first partial award by deleting such implications, and also delete paragraphs 4(b), (c) and (d), in my view that will achieve a result that: (a) is consistent with the proper scope of the preliminary hearing before the arbitrator that I have found; (b) does no more than is necessary to remove the vices that I have described in my earlier reasons; and (c) does not travel beyond what the arbitrator determined on the merits, in terms of that part of the permissible purview of the preliminary hearing that was transposed into his determination. 8 I reject the submissions of UDP and 5 Star Foods who have asserted that the whole of both of the partial awards must be set aside. In large part I agree with the submissions of Mr Greg Harris QC for Esposito on this aspect. 9 First, UDP and 5 Star Foods assert that I must set aside the whole of both awards because anything short of that step would involve an impermissible rewriting of the awards, which it is said that I do not have the power to undertake. It is said that I do not have the power to substitute my own view of what should have been the correct outcome on the merits by rewriting an award. I agree with those sentiments in the generality with which they have been expressed (see Grand Pacific Holdings Ltd v Pacific China Holdings Ltd (in liq) (No 1) [2012] 4 HKLRD 1 at [7]), but their emphasis by UDP and 5 Star Foods is misplaced in the present context. I am entitled to set aside part of an award in a way that does not impermissibly rewrite the award to give it a merits complexion beyond what the arbitrator determined (in other words, injecting my own merits assessment under the guise of the addition or deletion of words), and that is all that I propose to do. 10 Relatedly, and as a boundary condition, I am only entitled to set aside those parts of an award that are infected by the substantiated art 34 grounds(s) (AKN v ALC [2015] SGCA 18 at [80] and Brunswick Bowling & Billiards Corporation v Shanghai Zhonglu Industrial Co Ltd [2009] 5 HKC 1 at [75] and [124]). But to accept the assertions of UDP and 5 Star Foods would be to go beyond what I am empowered to give and what they are entitled to receive. More generally, it would infringe the precept of minimal curial intervention that is enshrined in arts 5 and 34 of the UNCITRAL Model Law and ss 2D, 16 to 21 and 39 of the International Arbitration Act 1974 (Cth) (see also AKN v ALC [2015] SGCA 18 at [37]). 11 Now UDP and 5 Star Foods have asserted difficulties in a partial setting aside arising from what they describe as the interconnectedness and inseverability of the first partial award. But these problems are not insurmountable. Moreover, my orders will achieve a commercial result that binds UDP and 5 Star Foods to a result that they should be bound to, given that such a result was otherwise within the proper purview of the preliminary hearing that they chose to be absent from. I must also say that their assurances contained in [7] of their written submissions, if I was to accede to their broader orders, hardly instilled me with confidence notwithstanding the observations in AKN v ALC [2015] SGCA 63 at [61] and [62]. There could be no res judicata or issue estoppel as such if the determinations were set aside in the manner for which UDP and 5 Star Foods have contended. Moreover, it may be queried how an Anshun estoppel could apply to a later arbitral proceeding (given that an Anshun estoppel has a different juridical basis), let alone where the determinations in the first arbitral proceeding would have been set aside. Further, Mr Martin Scott QC's assertion, on behalf of UDP and 5 Star Foods, that to "subsequently change their position" would amount to an "abuse of the arbitral procedure" and an "abuse of the process of the Court" was nebulous, although it had a superficial allure. 12 Further, UDP and 5 Star Foods have asserted that one of the benefits flowing from their proposal is that the issues that I had adverted to in [255] to [258] of my earlier reasons would disappear. But it seems to me that the solution advanced by Esposito readily addresses the matter. As I am dealing with partial awards and then only setting aside part thereof, the termination provision of art 32 does not apply. Accordingly, the arbitration should be treated as still on foot in terms of the relevant claims, defences and set offs to the extent that they have not been finally disposed of in the first partial award (as modified by my orders). Moreover, for that purpose it should be clear that I am not also making any formal remittal order under art 34 (in addition to the setting aside order(s)) as this was only an option if I had not exercised my power to set aside. The parties, or at least some of them, appear to accept that even in the absence of remittal, which I cannot order given the disjunction in art 34(4), the arbitration nevertheless "returns to the point" before the publication of the award. I will accept that to be so for present purposes. And on that foundation, I will make the necessary orders to replace the arbitrator. 13 Finally, although Esposito should pay the costs of the two proceedings, I do not consider that it is appropriate to make a lump sum costs order in favour of UDP and 5 Star Foods as they have sought. First, I do not see much advantage in making such an order particularly given that as between Hui and Esposito no such order has been sought. Second, it would seem that costs questions may be the subject of contest and duelling material in any event, even if I was to entertain the proposal for a lump sum order. Third, no issue has been raised concerning the financial capacity of Esposito to meet any additional costs of taxation. Finally, if the parties perceive that there is the potentiality for yet further dispute between them and expense arising from being condemned to a taxation, then that perception should act as a discipline on their behaviour to resolve the quantum of costs commercially. 14 I will make orders in the terms sought by Esposito in each proceeding. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Beach.

Hui v Esposito Holdings Pty Ltd

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