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IN THE SUPREME COURT OF VICTORIA
BLANALKO PTY LTD
LYSAGHT BUILDING SOLUTIONS PTY LTD
JUDGE: Croft J
WHERE HELD: Melbourne
DATE OF HEARING: 23 February 2017
DATE OF JUDGMENT: 10 March 2017
CATCHWORDS: ARBITRATION – Application for a stay of court proceedings in favour of arbitral proceedings – Application to set aside arbitral award – Whether arbitral award final where all issues referred to arbitration not determined – Extent to which correction and interpretation provisions of the legislation are applicable where arbitrator decides, expressly, not to determine an issue – Extent to which arbitrator’s mandate subsists – Johnson v Latham (1850) 19 LJQB 329 – Gatoil International Inc v National Iranian Oil Company (unreported, 22 February 1990, EWCA) – Administration of Norfolk Island v SMEC Australia Pty Ltd (2004) NFSC 1 – CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK  4 SLR 305 – TCL Air Conditioner (Zhongshan) Company Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361 – BLC v BLB  4 SLR 79 – Dyna-Jet Pte Ltd v Wilson Taylor Asia Pacific Pte Ltd  SGHC 238 – Commercial Arbitration Act 2011, s 5, 14, 32, 33 and 34 – Arbitration Act 1996 (Eng), s 68.
- This dispute has been before this Court since 2012. It deals with two proceedings, both of which now relate to unresolved legal costs arising out of the first proceeding. Specifically, the parties dispute whether Lysaght Building Solutions Pty Ltd (“Lysaght”) must pay the costs of Blanalko Pty Ltd (“Blanalko”) of and incidental to the first proceeding, including the reference to the Court of Appeal (“the Supreme Court Costs”).
- The first proceeding was commenced in 2012 by Blanalko which alleged that Lysaght had breached a design and construction contract that existed between the two parties. After an extensive procedural history that need not be recounted, it was partially settled in April 2016, with the remaining issues being referred to arbitration by the settlement deed of 21 April 2016 (“the Settlement Deed”).
- The arbitrator delivered an interim award on 15 June 2016 which resolved the majority of the remaining substantive issues and invited the parties to make submissions on, among other things, costs. This invitation did not distinguish between the costs of the arbitration and the costs of the Supreme Court proceeding. Lysaght and Blanalko made submissions on both kinds of costs.
- In the award delivered on 9 August 2016, an award which was styled as a “Final Award” (“the Award“), the arbitrator found that the parties had the power to refer the question of the Blanalko’s Supreme Court Costs to arbitration. Further, the arbitrator found that they had done so:
I have no doubt that the parties did agree that the Arbitrator should have the jurisdiction to consider and determine the costs of the Supreme Court proceedings brought by the parties, in the Arbitration.
The arbitrator did not, however, decide the issue of Blanalko’s Supreme Court Costs because he found that he lacked the necessary information.
- Neither party requested an additional award under s 33(5) of the CAA, nor took any steps, it seems, to otherwise communicate with the arbitrator for the purpose of resolving the Supreme Court Costs issue.
- In a summons dated 16 November 2016 (“the Summons”), Blanalko sought an order of the Court that Lysaght pay Blanalko’s Supreme Court Costs.
- In response to the Summons, on 2 December 2016 Lysaght filed an interlocutory application for stay under section 8 of the Commercial Arbitration Act 2011 (“the CAA”). This application relied upon the arbitration agreement in the Settlement Deed.
- The second proceeding was commenced on 4 November 2016 when Blanalko filed an originating application to set aside an award under s 34 of the CAA. Section 34 empowers the Court to set aside an arbitral award in limited specified circumstances. Blanalko sought to set aside the award to the extent that the arbitrator declined to determine the Supreme Court Costs, on the basis that the arbitrator had no power to so decline and, further, in so doing referred the issue to a “third party” for determination—namely, the Court.
- Issues were raised as to whether the arbitrator was functus officio from 8 September 2016, being 30 days after the arbitrator’s Final Award on 9 August 2016, having regard to ss 32 and 33(5) of the CAA. The essence of the dispute now is whether, if the arbitrator is presently functus officio, there is a tribunal or court before which Blanalko may pursue its claim for the Supreme Court Costs which the arbitrator did not decide and, if the arbitrator is not functus officio, what is the position of the parties.
- Although in light of the authorities it now almost goes without saying, it is vital to interpret the CAA in light of its status as a domestic application of an international model law—the UNCITRAL Model Law on International Commercial Arbitration (“the Model Law”). Notwithstanding the fact that the CAA is a domestic statute in the State of Victoria, it should be interpreted in conformity with international norms with respect to the Model Law, “so far as practicable”. The following principles of interpretation were distilled by the Court of Appeal in Subway:
(a) certainty and uniformity of application are of paramount importance;
(b) to that end, the rules generally applicable to the interpretation of domestic statutes give way to the rules applicable to the interpretation of treaties;
(c) because the international agreement is addressed to a much wider and more varied judicial audience than an act of a domestic legislature, the interpretation of the domestic enactment should be unconstrained by technical rules of interpretation and should instead be informed by “broad principles of general acceptation”; and
(d) recourse may be had to the working documents of the international body by which, or through which, the agreed rules were developed.
The prima facie requirements for a stay under section 8 are satisfied
- Section 8(1) of the CAA governs the circumstances in which a court must decline to hear a dispute that is subject to an arbitration agreement:
A court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests not later than when submitting the party’s first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.
- Lysaght correctly sets out the positive elements that must be satisfied in order for a stay of the 2012 proceedings to be granted under s 8 of the CAA:
(a) the existence of an arbitration agreement;
(b) that the matter pending before the court is the subject of (i.e. within the scope of) the arbitration agreement; and
(c) that the party requesting a stay has done so not later than when submitting its first statement on the substance of the dispute.
- The parties do not dispute the existence of an arbitration agreement. Nor do they dispute before me that the Supreme Court Costs were within the scope of the arbitration agreement. That the request for a stay was in time was similarly uncontroversial. Thus unless Blanalko can establish that the arbitration agreement is “null and void, inoperative or incapable of being performed”, the stay will be granted and the Court will not hear Blanalko’s application in the 2012 proceedings.
Blanalko’s three possible courses or options
- In light of the prima facie position with respect to the application for stay under s 8 of the CAA, Blanalko proposes three possible courses or options that the Court might take in order for its claim for costs to be heard. It is helpful in understanding the position of the parties to state and consider these possible courses or options before returning to consider them and the issues they raise in the latter part of these reasons. These position courses or options are:
(1) not refer the matter to arbitration under s 8 because the Arbitrator is functus officio and therefore incapable of making an effective award. Instead the Court will hear and determine the question itself; or
(2) refer the matter to arbitration under s 8 because doing so re-establishes the arbitrator’s jurisdiction such that he ceases to be functus officio; or
(3) under s 34(2)(a)(iii), quash so much of the award as regards the issue the arbitrator has refused or declined to decide on the basis that this was a decision on a matter beyond the scope of the submission to arbitration, but allow the arbitrator the opportunity to correct the irregularity under s 34(4).
None of these courses is available. As is explained in the reasons which follow, the mere fact that an arbitrator is functus officio will not result in an arbitral agreement being inoperative or incapable of being performed. Thus, the first option is not a viable course. The second option relies on an incorrect analysis of the effect of a stay by the Court under s 8, and the third assumes that the decision of the arbitrator was, properly analysed, a decision which he was not authorised to make; which, in my view, is not the case.
- Before turning to the reasons why each of these options is unavailable, it is desirable to comment on the possible consequences of that conclusion if it is accepted that the arbitrator is functus officio. In those circumstances, the effect of denying Blanalko’s applications would be that Blanalko would be unable to recover significant costs by way of the Supreme Court Costs to which it may well have a substantive entitlement. This may, at first sight, seem unjust. The fairness of this result, were the arbitrator to be found to be functus officio, arises out of the fact that the two parties freely agreed to a particular dispute resolution procedure. Party autonomy is paramount in arbitration. Although the arbitration may not have functioned as planned, this was a risk to which the parties consented. Blanalko submits that natural justice entails that there be some avenue of redress where an arbitrator declines to deal with the whole of their reference and suggests that avenue of relief is under s 34 of the CAA. It is not necessary in the present circumstances to determine if natural justice requires some kind of redress. Here, were the arbitrator functus officio, there was a mechanism provided in s 33(5) of the CAA for Blanalko to have the Supreme Court Costs determined assuming the arbitrator’s failure to do so himself can be characterised as an “omission” for the purposes of these provisions.
Section 33(5) of the CAA: an opportunity not taken?
- The CAA contains a mechanism for correction and interpretation of an award and provisions empowering the arbitrator to make an additional award in the circumstances specified. Thus, s 33(5) provides:
Unless otherwise agreed by the parties, a party, with notice to the other party, may request, within 30 days of receipt of the award, the arbitral tribunal to make an additional award as to claims presented in the arbitral proceedings but omitted from the award.
This mechanism balances two crucial features of any domestic law of arbitration: fairness and efficiency. In order for procedural fairness to be granted to both parties, they must have a reasonable opportunity to present their case; the corollary of which includes the right, necessarily limited to preserve finality of arbitral decision making, to request correction, interpretation and supplementation of the arbitral award. Clearly, in order for arbitration to be fair, efficient and cost-effective, a degree of finality and certainty is required, hence any impediment to an award being final and unchallengeable must be subject to strict temporal limitations; such as the 30 day limit in s 33(5) of the CAA.
- The extent of the finality of a particular arbitral award does, however, depend upon its true ambit, however it might be labelled—whether as an interim award, a partial award, a final award or otherwise. Thus, s 33 of the CAA is directed to an “award”. Consequently, the provisions of s 33(5) of the CAA operate with respect to any “award” to the extent that the issue subject to a request under those provisions is properly characterised as “final”—whatever the “label” placed on the “award” by the arbitrator. This is critical to keep in mind when considering the meaning of the word “omitted” in s 33(5). In this respect, it is relevant to observe that the dichotomy between an award properly characterised as a “final award” and an award not so properly characterised is maintained in s 32 of the CAA, which deals with the termination of arbitral proceedings.
- Counsel for Blanalko submitted that s 33(5) of the CAA does not operate as a “guillotine” in that a failure to make a request under s 33(5) of the CAA will not be a bar to applications under ss 34, 34A and 36 of the CAA. In a sense, this is correct. The merits of applications under other sections, such as s 34(2)(a)(iii) of the CAA must be assessed independently; though this is not to say that their operation may not be more or less interrelated depending on the particular circumstances. Thus, the failure of a party to make use of s 33(5) of the CAA may be relevant to the Court’s exercise of discretion under such a provision. However, it is unnecessary to take this aspect further, as the application under s 34(2)(a)(iii) fails on other grounds. In another sense, however, s 33(5) of the CAA does operate as a guillotine. Under s 32 of the CAA, the arbitral tribunal will be functus officio upon delivery of the final award, subject to ss 33 and 34(4). Thus, if no request is made within the time limits of those sections, the guillotine will fall and the arbitrator’s power will be beyond unilateral revival. After that time, only a fresh arbitration agreement would suffice to grant the arbitrator jurisdiction. It will, however, be appreciated that s 32 is directed, expressly, to the position in the event of a final award (and other circumstances not presently relevant). Sections 33 and 34 are not so limited and apply to an “award”, final or otherwise.
Section 33(5) of the CAA: accidental omissions only?
- It was submitted by counsel for Blanalko that s 33(5) of the CAA does not apply to conscious decisions by an arbitrator not to decide a matter falling within the reference to arbitration but only to accidental or inadvertent omissions to decide such a matter. The use of the word “omitted” does, as a matter of ordinary English usage, tend to suggest a quality of “inadvertence”. This would suggest that s 33(5) is not intended to address the situation where, as in the present circumstances, the arbitrator made a conscious and express decision not to decide one of the “claims presented in the arbitral proceedings”. There are, however, contrasting views in this respect; views to which I now turn.
- It is true that if s 33(5) applies only to inadvertent omissions, there may be circumstances where it is not clear whether or not the omission was inadvertent or intentional. Circumstances of this kind may involve some difficulty in determining the position, particularly having regard to the need for the Court to avoid examining the arbitration process in a manner inconsistent with the approach of the CAA, which is for minimum court involvement and the absence of merits appeals (the latter except in the confined circumstances of s 34A, and then only with respect to domestic arbitrations, to which the CAA applies). In the present circumstances, no such difficulty arises as the arbitrator has made it quite clear that the Award does not decide all “claims presented at the arbitral proceedings”.
- The commentary on s 33(5) in Australian Commercial Arbitration provides a broad statement of the plain meaning of the section:
It is unclear as to what could be dealt with in an additional award, but the provision is there to ensure that any issues which have not been covered—but which are mandated by the arbitration agreement—are ultimately resolved to enable one or both of the parties to make a request seeking to ensure the tribunal discharges its duties.
- There is, however, some tension in other scholarly analyses of s 33(5) of the CAA and its equivalents derived from Article 33 of the Model Law. Commentary on the New Zealand legislation implementing the Model Law supports the view that the omission must be accidental:
The Arbitration Act 1908 allowed the court to remit the award back to the arbitrator for reconsideration in cases where the award plainly failed to deal with a claim. There is no such power in either the [Model Law] or the NZ Act. Instead, when an arbitral tribunal has overlooked a claim or issue in making its award, the art 33(3) power allows either party to request the tribunal to provide an additional award. In the event that the tribunal improperly refuses to do so, this could constitute a ground for setting aside the award on the grounds of breach of natural justice under art 34(2)(b)… In New Zealand, a party claiming that the award is incomplete must apply under art 33(3).
The word “overlooked” clearly refers to an inadvertent failure to decide.
- Other commentary explicitly suggests that the failure to decide need not be inadvertent:
Section 33 [of the CAA] covers both errors of omission, as well as errors of commission. In SIAC Arbitration No. 6 of 1996, it was argued that the operation of Art 33 of the Model Law was narrower than the “slip rule” developed in common law jurisdictions. Therefore, Art 33 would not permit a correction of an award of costs where some costs had been omitted. The presiding arbitrator held that this was incorrect and that Art 33 of the Model Law was best understood as being in contradistinction to errors of judgment, whether of law or fact, which the tribunal was not empowered to correct. In this case, as it was a matter concerning the omission of a particular head of costs, the tribunal was empowered to correct a certificate of costs.
On this view, s 33(5) allows an arbitrator to revisit his decision to the extent that doing so does not re-agitate previous findings. This is, in a sense, unhelpful, because a tribunal deciding matters that it has previously decided not to decide may be seen as re-agitating an issue with which the tribunal has already dealt; though in all probability in an award not properly characterised as a final award, given the conscious omission and decision not to decide the matter.
- The UNCITRAL debates on the drafting of the Model Law do not shed any light directly on the intended meaning of the word “omitted” in Article 33(3) (now enacted in s 33(5) of the CAA). There is, however, some strong indication in the following UNCITRAL materials that the word—hence the ambit of Article 33(3)—was intended to be no more broad than minor corrections, most likely arising from inadvertence. This is, in my view, indicated in the following extracts from the UNCITRAL Secretariat Notes (16 December 1983 and 25 March 1985):
FOURTH SECRETARIAT NOTE
COMMENTS AND SUGGESTIONS ON THE FOURTH DRAFT
A/CN.9/WG.II/WP.50 (16 DECEMBER 1983)
G. Suspension of award (articles 33, 34, 36)
20. The draft model law refers to the procedural possibility of a suspension of the award only indirectly in article 36(1)(a)(v) and (4), stating certain legal consequences of a suspension or an application for suspension. The Working Group may wish to consider adding a positive provision which would grant a right to request suspension of an award made under this Law. Such a right may be appropriate in conjunction with the right to request a correction under article 33(1)(a), possibly in conjunction with the right to request an interpretation under article 33(1)(b), and certainly in conjunction with an application for setting aside under article 34. [Editors’ Note: This proposal does not appear to have been discussed by the Working Group or the Commission in subsequent sessions.]
H. Additional award requiring further hearings or evidence (articles 33, 34)
21. Article 33(2) envisages the making of an additional award as to claims presented in the arbitral proceedings but omitted from the award only where such omission can be rectified without any further hearings or evidence. The question therefore remains what would happen in those cases where further evidence or hearings are required.
22. From a practical point of view, the suggested answer would be that the arbitral tribunal could still be entitled or required to make the additional award since it did not completely fulfil the mandate entrusted to it. If this view were adopted, it would mean that the restriction contained in article 33(2) would be abolished, although this provision might be retained for the residual purpose of setting a time-limit of sixty days for these restricted cases. A supplementary consideration would be to include in article 34 a provision to the effect that the award may be set aside if the points dealt with therein cannot be separated from the points omitted. In this context, the possibility of remission under article 34(4) may prove to be a very useful device.
23. The need for an express rule on this question becomes apparent when one looks at the present draft provisions. It is at least a possible interpretation of articles 33(2) and 34 that omission of a claim requiring further hearings or evidence constitutes a ground for setting aside the award, irrespective of whether the omitted points can be separated from the points dealt with in the award. The omission could then be rectified by the arbitral tribunal if the award would be remitted to it for completion. If, however, the Court would not remit the award but would set it aside, a problem of general relevance arises which is treated in the following section (paras. 24-26). …
SEVENTH SECRETARIAT NOTE
ANALYTICAL COMMENTARY ON DRAFT TEXT
A/CN.9/264 (25 MARCH 1985)
Article 33. Correction and interpretation of awards and additional awards
1. Article 33 extends the mandate of the arbitral tribunal beyond the making of the award for certain measures of clarification and rectification, which may help to prevent continuing disputes or even setting aside proceedings. The first possible measure is to correct any error in computation or any clerical, typographical or similar error, either upon request by a party or on its own initiative. The second possible measure is to give an interpretation of a specific point or part of the award, as specified by a party, and to add this interpretation to the award. The third possible measure is to make an additional award as to any claim presented in the arbitral proceedings but omitted from the award (e.g., claimed interest was erroneously not awarded). If the arbitral tribunal considers the request, not necessarily the omitted claim, to be justified, it shall make an additional award, irrespective of whether any further hearing or taking of evidence is required for that purpose.
2. The period of time during which a party may request any such measure is thirty days of receipt of the award. The same period of time, calculated from the receipt of the request, is accorded to the arbitral tribunal for making the correction or giving the interpretation, while a time-limit of sixty days is set for the usually more difficult and time-consuming task of making an additional award. However, there are circumstances in which the arbitral tribunal would be unable, for good reasons, to comply with these time-limits. For example, the preparation of an interpretation may require consultations between the arbitrators, the making of an additional award may require hearings or taking of evidence, and in any case initially sufficient time must be given to the other party for replying to the request. The arbitral tribunal may, therefore, extend the time-limits, if necessary.
This follows from the discussion in relation to the subsistence or otherwise of the arbitrator’s mandate because if the arbitral tribunal has purported to discharge the mandate—but with an omission, caused by error or otherwise—in other words, an omission by inadvertence, the mandate is discharged, hence the need for the provisions of Article 33 (s 33 of the CAA) to extend the mandate to enable the correction or clarification. On the other hand, a conscious decision not to deal with an issue—that is, not to fully discharge the mandate—leaves the arbitral tribunal with the undischarged mandate to complete the task, hence does not require the assistance of Article 33 (s 33 of the CAA) to extend the mandate.
- For the preceding reasons, particularly having regard to the language used and the UNCITRAL Model Law and the UNCITRAL materials, I am of the opinion that s 33(5) of the CAA is only applicable to inadvertent omissions and not to a situation where an arbitrator decides not to decide a “claim” which was “presented in the arbitral proceedings”. It follows, of course, that such a claim must be one within the scope of the arbitration agreement. This is also consistent with the position that, properly characterised and regardless of its “label” as final or otherwise, an award not dealing with all such claims is not, certainly in the present circumstances, likely to be construed as a final award thus rendering the arbitrator functus officio with respect to all “claims presented in the arbitral proceedings”. Intentional “omissions” which do not detract from the position that all such claims have been decided fall into another category and may, on a purposive approach and the possible absence of other remedies under the CAA—other than under s 33(5)—be subject to s 33(5). That is not, however, the position here, so the point is not necessary to decide.
- Upon a plain reading of the Award, the claim with respect to the Supreme Court Costs was not decided; and was entirely open to revisitation. The arbitrator’s reason for not dealing with this claim was the lack of evidence before the arbitrator. There is no indication in the Award that the arbitrator was not prepared to deal with the Supreme Court Costs claim if and when the requisite evidence was provided. It was clearly open to either party to engage with the arbitrator to assist the determination of this outstanding claim—whether in fulfilment of general duties of parties to assist the arbitral process under s 24B of the CAA or out of legitimate self-interest. For the reasons which follow, the arbitrator was clearly able to entertain the claim and to resolve it by decision.
Blanalko did not have to make a strategic decision
- For the sake of completeness, reference should be made to the complaint by Blanalko that if this Court were now to find that the only avenue available to Blanalko was an application unders 33(5) of the CAA, which is now time barred, this would occasion unfairness because Blanalko could only impugn the award on one ground and it could not know which ground would succeed. Even if it was forced to make such a choice, parties are bound by their strategic decisions and their inability to foresee the correct choice does not generally provide any basis for a remedy. Blanalko was not, however, forced to choose between requesting an additional award and bringing an application in this Court for the award to be set aside insofar as it failed to deal with the issue of the Supreme Court Costs. This assumes, of course, that the Award was properly characterised as “final” and that there was a ground available on which an application to set aside could be established. As these reasons indicate, I am of the view that neither assumption can be sustained.
- In any event, a party may both request an additional award and apply for an award to be set aside simultaneously. For example, a German court found that an arbitral tribunal was obliged to make an additional award despite an application being made to set aside the main award on the grounds that the tribunal incorrectly determined its jurisdiction. Thus, there was no basis for Blanalko’s belief that it had to elect either to request an additional award or seek to have the award set aside, at least partially. Indeed, the latter avenue may have had better prospects of success if the former avenue had been unsuccessful in yielding a result from the arbitrator. Thus, counsel for Blanalko’s submission that “a second bite of the cherry” would be unavailable is simply incorrect, as is apparent from a plain reading of the CAA. Blanalko has not referred to any basis for that proposition in either the CAA or the case law.
A request under s 33(5) of the CAA would not have been an abuse of process
- Counsel for Blanalko also submitted that making a request under s 33(5) of the CAA “would be putting ourselves into a position of abuse of process”. At first sight, this appears to be a curious submission having regard to the rights and obligations of parties and arbitrators under the CAA. Nevertheless, I understand this submission to be that a request for a further award on an issue that an arbitrator has finally determined would be in breach of a party’s obligations under both the CAA and the Civil Procedure Act 2011. Abstractly, this point may have some merit, as Allsop CJ observed in TCL Air Conditioner (Zhongshan) Company Ltd v Castel Electronics Pty Ltd, a party ought not to make “a disguised attack on the factual findings of the arbitrators dressed up as a complaint about natural justice”. This would not have been the case had a request been made under s 33(5) of the CAA, for the preceding reasons; and, for those which follow, it would have been open to the parties to request the arbitrator to complete his mandate under the arbitration agreement—a request not reliant on s 33(5)—as the Award is not a final award.
The arbitrator could have taken further evidence
- It was submitted by counsel for Blanalko that an arbitrator could not take further evidence before the making of an additional award in answer to a request under s 33(5) of the CAA and that consequently, s 33(5) did not apply in circumstances where an arbitrator declined to deal with an issue due to insufficient evidence. The conclusion reached by Blanalko that s 33(5) did not apply was relied upon to strengthen its claim that it was entitled to redress elsewhere by way of setting aside under s 34, and could thus avoid the time bar in s 33(5) of the CAA. While this point was not really explored before me, and I believe that nothing turns on it, in the present context it is, nevertheless, useful to say something about the point.
- In arguing that s 33(5) only applied where all the evidence was in, counsel for Blanalko relied on the UNCITRAL Analytical Commentary on the Draft Text of a Model Law on International Commercial Arbitration (“the UNCITRAL Analytical Commentary”). The UNCITRAL Analytical Commentary makes it inescapably clear that an arbitrator may take further evidence to enable him or her to make an additional award (material previously set out but repeated for the sake of clarity and emphasis):
1. Article 33 extends the mandate of the arbitral tribunal beyond the making of the award for certain measures of clarification and rectification, which may help to prevent continuing disputes or even setting aside proceedings… The third possible measure is to make an additional award as to any claim presented in the arbitral proceedings but omitted from the award (e.g. claimed interest was erroneously not awarded). If the arbitral tribunal considers the request, not necessarily the omitted claim, to be justified, it shall make an additional award, irrespective of whether any further hearing or taking of evidence is required for that purpose.
2. The period of time during which a party may request any such measure is thirty days of receipt of the award. The same period of time, calculated from the receipt of the request, is accorded to the arbitral tribunal for making the correction or giving the interpretation, while a time-limit of sixty days is set for the usually more difficult and time-consuming task of making an additional award. However, there are circumstances in which the arbitral tribunal would be unable, for good reasons, to comply with these time-limits. For example, the preparation of an interpretation may require consultations between the arbitrators, the making of an additional award may require hearings or taking of evidence, and in any case initially sufficient time must be given to the other party for replying to the request…
- The fourth draft of the Model Law, which preceded the draft upon which the UNCITRAL Analytical Commentary was made, did not allow for further taking of evidence before an additional award was made. Specifically, the fourth draft provided:
Unless otherwise agreed by the parties, a party, with notice to the other party, may request, within thirty days after the receipt of the award, the arbitral tribunal to make an additional award as to claims presented in the arbitral proceedings but omitted from the award; if the arbitral tribunal considers such request to be justified and that the omission can be rectified without any further hearings or evidence, it shall make that additional award [within sixty days after the receipt of the request].
The deletion of the explicit requirement that there must be no need for further hearings or evidence is telling. The basis for allowing further evidence is that to do otherwise would entail that an entire award might be set aside due to deficiencies in the evidence that could have been efficiently remedied before delivery of an additional award. Given that no case law or other material that contradicts the UNCITRAL Analytical Commentary has been put before me, Blanalko’s allegation that s 33(5) only applies when no further evidence need be taken is rejected.
Option 1 fails: the arbitration agreement is not inoperative or incapable of being performed
- Section 24 of the Supreme Court Act 1986 empowers the Court to make an award of costs in proceedings before the Court. Blanalko submits that other than entering into an arbitration agreement, it “never released or abandoned its claim for a liability finding that [Lysaght] pay the unresolved costs of the Supreme Court proceedings” and consequently that it “is entitled to ask the Court for an Order in favour for those costs pursuant to s 24 of the Supreme Court Act 1986”. Thus Blanalko correctly observes that the only barrier to the Court hearing an application for an award of costs under s 24 of the Supreme Court Act 1986 is s 8 of the CAA. The question is therefore whether the arbitration agreement, insofar as it relates to the Supreme Court Costs, is inoperative or incapable of being performed.
- ‘[I]noperative or incapable of being performed’ is a high bar to satisfy. As stated by Bingham LJ in Gatoil International Inc v National Iranian Oil Company:
The words “incapable of being performed” are a strong expression, in my judgment denoting impossibility, or practical impossibility, and certainly not mere inconvenience or difficulty. A mere change of circumstances rendering arbitration a less attractive mode of resolving a dispute or rendering the forum or the procedural rules chosen for any reason unattractive, could never be enough. For a party who has agreed to resolve any dispute by arbitration to be freed from his obligation under s 1(1) it is, in my judgment, necessary for him to show that the arbitration agreement simply cannot, with the best will in the world, be performed. I am satisfied that the words of exception should be strictly construed so as to reflect the intention of the Convention and the Act.
- Vinodh Coomaraswamy J observed in Dyna-Jet Pte Ltd v Wilson Taylor Asia Pacific Pte Ltd that:
An arbitration agreement is inoperative, at the very least, when it ceases to have contractual effect under the general law of contract. That can occur as a result of a number of doctrines of the law of contract such as discharge by breach, by agreement or by reason of waiver, estoppel, election or abandonment.
His Honour concluded that “inoperative” “contemplates… the parties’ contractual obligation to arbitrate their disputes ceasing to have effect or being discharged by events or circumstances arising outside the contract.” Thus it seems that the cause of the discharge of the contract is relevant to whether the contract is “inoperative”.
- Blanalko relied on Vinodh Coomaraswamy J’s statements and went further, submitting that a contract discharged by deficient performance is similarly inoperative. Put another way, it was submitted that an arbitration agreement is inoperable where an arbitrator does not decide, or decides not to decide, all of the matters contained in the reference to arbitration. This seems problematic for two reasons. First, the statements referred to in the immediately preceding paragraph, upon which Blanalko relied, suggest that an agreement will be inoperative in significantly different circumstances to those present. Particularly, a discharge of the contract by performance seems to be an event or circumstance arising inside the contract, in the sense of being the result of the operation of its provisions; precisely the opposite of that to which Vinodh Coomaraswamy J was referring.
- Secondly, where an arbitral tribunal delivers an award that deals with the whole of the reference to arbitration, it is s 8 of the CAA, not res judicata or some other general doctrine, which prevents the substance of the award being re-litigated. The arbitration agreement continues to operate in this sense. Similarly, where an arbitral tribunal delivers an award that deals with most of its reference, as is the case here, it is s 8 of the CAA which prevents the re-litigation of those matters which have been finally decided in the award. This means that the arbitration agreement is operative and therefore that those matters which were decided in the award may not be re-litigated. Thus, an arbitration agreement will not be inoperative or incapable of being performed merely because it is not fully performed. It is for this reason that whether the arbitrator is wholly or partially functus officio is irrelevant for the purposes of s 8 of the CAA.
- In Administration of Norfolk Island v SMEC Australia Pty Ltd, Beaumont CJ approved of the following extract from Halsbury’s Laws of Australia, which remains current:
The onus lies on the party resisting the stay of proceedings application on the ground that the arbitration agreement is null and void, inoperative or incapable of being performed, to show that there is some flaw in the agreement, for example:
(1) want of offer and acceptance;
(2) want of consideration;
(3) the arbitration agreement is illegal or otherwise void ab initio; or
(4) the arbitration agreement has become void ab initio by operation of law or court order.
An arbitration may be described as “inoperative”, at least in so far as the arbitration of a given dispute is involved, where the arbitral tribunal declines to proceed with the reference, where the right to arbitrate has been waived or where the court has ordered that it cease to have effect. The requirement that the arbitration be “incapable of being performed” involves proof of more than delay or inconvenience and more than some procedural bar or the effect of a time bar. The fact that a party was unwilling or unable to satisfy an award which might be made is also insufficient. What is required is that there exists some obstacle which cannot be overcome by parties who are ready and willing to perform the agreement.
While this passage may seem to support the general position that the arbitration agreement is inoperative, where an arbitral tribunal “declines to proceed with the reference”, this proposition must be viewed in the particular context of such a situation. Here, the arbitrator did not determine one of the issues within the submission to arbitration and was not pressed to decide the issue by the parties. Consequently, insofar as the arbitrator declined to proceed with the reference, a position which will shortly be explored in greater detail, it was not an “obstacle which [could not] be overcome by parties who [were] ready and willing to perform the agreement”. Moreover, Fowler v Merrill Lynch Pierce & Smith Inc, which is the case cited as authority for the emphasised proposition of the above quote, does not, in my view, support the proposition for which it is cited.
- For the preceding reasons, the arbitral agreement remains operable and thus the Court is required to stay the application under s 8 of the CAA.
Option 2: The Court cannot revive the arbitrator’s jurisdiction by a reference under section 8
- A successful application under s 8 of the CAA will not have the result of granting an arbitral tribunal jurisdiction it does not already possess. Here, the only source of the jurisdiction of the arbitral tribunal is the agreement of the parties. The Court will only refer a matter to arbitration where a party has the right to commence or continue an arbitration. No such right would exist here if a final award had been delivered and the jurisdiction of the arbitral tribunal thus terminated in accordance with s 32 of the CAA. As these reasons indicate, the position is otherwise where the award, properly characterised, is not a final award.
Option 3: Neither the Final Award nor any part of it may be set aside
- In the alternative to having the Supreme Court Costs determined by the Court, Blanalko seeks to have the award set aside insofar as it fails to determine the Supreme Court Costs. The only recourse against an arbitral award is under Part 7 of the CAA.
- Blanalko, in support of this course or option, sought to rely on Mustill and Boyd and a number of cases to which the learned authors refer in making the following submissions:
Where an Arbitrator fails to decide upon an issue which he ought to have decided then the Award is defective…
This submission does not, however, reflect the position being put by Mustill and Boyd. Rather, for reasons the reference to Mustill and Boyd where these cases are cited goes, in my view, to the position that, properly characterised, the Award is not a final award. In any event, the effect of s 34(1) of the CAA is plain—an arbitral award will only be set aside on the grounds specified in the Act. Thus, the failure of an arbitrator to decide a matter falling within the submission to arbitration is, without more, not a ground on which an award will be set aside.
- More particularly, Blanalko seeks an order under s 34(2)(a)(iii) of the CAA “setting aside the award insofar as it declines to determine the question of the costs of the Supreme Court proceeding”. Section 34(2)(a)(iii) of the CAA provides:
(2) An arbitral award may be set aside by the Court only if—
(a) the party making the application furnishes proof that—
(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside.
- No order is granted under this subsection for the reasons that follow. Ultimately, the arbitrator’s failure to decide the Supreme Court Costs was, properly analysed and in the context of an award, not properly characterised as a final award capable of being set aside under s 34(2)(a)(iii).
The identity of the impugned decision
- Section 34(2)(a)(iii) of the CAA empowers the Court to set aside an award insofar as it “contains decisions on matters beyond the scope of the submission to arbitration”. Thus, in order for an application under s 34(2)(a)(iii) of the CAA to succeed, the applicant must be able to identify a decision which is alleged to fall within this description. There is some confusion in Blanalko’s submissions regarding the identity of the decision that they seek to set aside. Blanalko variously identified the arbitrator’s decision as “permitting the parties to make application to the Supreme Court for it to determine the question”, “a decision not to make a decision” and even that the arbitrator “did not make any decision at all”. Counsel for Blanalko provided an equally ambiguous summary:
The arbitrator had no power to resolve the Supreme Court costs the way he did. What he did was contrary to the mandate the parties gave him to resolve the issue and to publish an award disposing of that issue. In his purported disposition of the issue he acted beyond the scope of the submission by determining that the issue had to be referred to a third party, namely this court.
[H]e was correct to have not made a decision on the point in circumstances where he told himself he was uncertain and needed more information.
- Counsel for Lysaght submitted that “[t]he arbitrator in substance, upheld the no or insufficient evidence submission that [Lysaght] had made”. Yet counsel for Lysaght also characterised the decision as a “non-decision” which does not prejudice the rights of parties, whatever they may be, to apply to the Supreme Court of Victoria for the costs issue to be determined. Consequently, it was said that it was not a positive direction that parties could have their dispute determined by the Court.
- I do not accept that the arbitrator attempted to permit or direct the parties to apply to this Court. The arbitrator did not have this power and his award does not suggest that he tried to exercise such a power. The arbitrator said in paragraph 6 of the dispositive part of the Award that the fact that he was not prepared to decide the Supreme Court Costs was “without prejudice to either party making an application to the Supreme Court”. I accept Lysaght’s submission that this language clearly indicates that, at least in the arbitrator’s view, that the rights of parties to apply to the Supreme Court of Victoria, whatever they may be, were not prejudiced by the Award. As indicated in these reasons, I am of the opinion that the arbitrator’s view in this respect was not correct. However, it is one thing for an arbitrator to leave a claim undetermined and express a view that the parties may, nevertheless, find determination elsewhere, and quite another to decline to resolve a claim and purport to direct and delegate the arbitral decision making role to another. In my view, as I now discuss in detail, the arbitrator’s view and conduct was of the former, rather than the latter, type.
- If the arbitrator “did not make any decision at all” the application under s 34(2)(a)(iii) will necessarily fail. While finding that he had jurisdiction to make an award of costs, the arbitrator stated:
23. In the circumstances, I am not prepared to determine the issue of the Supreme Court costs. I do not have sufficient information to enable me to do so. It is not appropriate that I should guess what occurred in each application and hearing. Accordingly, I will not make any decision on the issue and this is without prejudice to either party making an application to the Supreme Court. That may be the quickest and cheapest way to finalise it.
24. I make the following final award —
6. That the issue of the payment of costs of the Supreme Court proceedings between the Claimant and the Respondent is not decided, without prejudice to the rights of the parties to apply for the costs in the Supreme Court of Victoria.
This extract from the critical part of the Award, for present purposes, shows that the arbitrator considered whether to make an award on the Supreme Court costs. As the arbitrator undertook that consideration and reached a conclusion, it is clear that the arbitrator did decide, expressly, not to decide this claim. Yet to the extent that there was a decision not to decide, it was implicitly, and in my view very clearly, a decision not to decide at that time on the then available evidence. Although, in general terms, a decision not to decide a matter may, in the particular circumstances, provide a basis for setting aside under s 34(2)(a)(iii) of the CAA, a decision not to decide on the evidence presently before an arbitrator in circumstances like the present does not provide any such ground. All the arbitrator has done is not discharge his whole mandate; he has not gone beyond it. As to the latter, particularly, there is no delegation to, or direction to, the parties to take the Supreme Court Costs claim to a “third party” decision maker; namely the Court in this instance.
- What is more, the history of the CAA indicates that s 34(2)(a)(iii) applies to decisions that exceed the tribunal’s jurisdiction rather than decisions which do not exercise the tribunal’s jurisdiction. Section 34 of the CAA is based on article 34 of the Model Law which in turn is based on article V of the New York Convention. The predecessor of the New York Convention, the Geneva Convention on the Execution of Foreign Arbitral Awards, specifically allowed for an award to be set aside for failure to deal with the whole of its reference:
[R]ecognition and enforcement of the award shall be refused if the Court is satisfied:—
(c) That the award does not deal with the differences contemplated by or falling within the terms of the submission to arbitration or that it contains decisions on matters beyond the scope of the submission to arbitration.
The italicised section was omitted from Art V(1)(c) of the New York Convention and subsequently, from s 34(2)(a)(iii) of the Model Law and s 34(2)(a)(iii) of the CAA. This supports the notion that a “decision not to make a decision” is not a decision that may be set aside under s 34(2)(a)(iii) of the CAA.
- Had the arbitrator decided the dispute on the evidence—or lack of it—then before him, he would no doubt have been criticised on the basis of there being insufficient or no evidence in which he could make a determination. Arbitrators cannot be expected to make decisions based on guesswork and assumptions not supported by evidence and—as I have said—would be criticised for so doing and, in any event, an award on this basis would most likely be set aside. It is, of course, in situations like this that the parties are expected—indeed mandated—by Parliament to assist the arbitral process. The duties provided for in s 24B of the CAA (and, of course in the paramount object of the CAA in s 1AC) make this crystal clear.
A decision not to decide: within the power of an arbitrator?
- The crux of Blanalko’s complaint is that the arbitrator did not decide the Supreme Court Costs, which was an issue within the scope of the reference to arbitration, the mandate. Due to the interim nature of the decision not to decide in this case, nothing turns on the abstract question of whether a final decision not to decide may possibly be set aside under s 34(2)(a)(iii). As indicated previously, this will depend upon all the circumstances and the nature and extent of the arbitrator’s mandate. Nevertheless, a final refusal by the arbitrator to discharge the mandate may, in the circumstances, amount to a failure to act for the purpose of s 14 of the CAA, leading to remedies provided under those provisions. On one view, the fact that Blanalko did not make a request under s 33(5) of the CAA for the remaining issue of the Supreme Court Costs to be the subject of a further award may guide the Court’s discretion. In this respect, the Singaporean Court of Appeal observed in BLC v BLB:
53. The setting aside application is not to be abused by a party who, with the benefit of hindsight, wished he had pleaded or presented his case in a different way before the arbitrator.
109. It is clear that the Model Law supports the principle of minimal curial intervention. To this end, as long as the parties do not agree otherwise, the Model Law provides via Art 33(3) a mechanism for a party to seek redress from the arbitrator first before turning to the courts when he believes that the arbitrator had omitted to deal with a stand-alone claim presented to him. In such circumstances, should a party be entitled to ignore Art 33(3) and instead apply to set aside the entire award under Art 34, knowing that the court may in appropriate circumstances fall back on its powers to remit part of the award back to the tribunal under Art 34(4) if it decides that setting aside the entire award is not the appropriate remedy?
110. On the one hand, it is arguable that a party ought to be penalised if he does not invoke Art 33(3) before invoking Art 34 (assuming that the relevant circumstances permitted recourse to Art 33(3)). If not, Art 33(3) would be rendered toothless and moribund as there is simply no incentive for a disgruntled party to invoke it. If a party is not penalised for relying on Art 34 without first invoking Art 33(3), this could potentially be seen as an abuse of the setting-aside process under Art 34 of the Model Law, particularly in situations where the party is alleging that the tribunal had failed to deal with a relatively minor claim in the light of that party’s entire claim.
116. It is possible to reconcile these two seemingly opposed positions … by recognising that whilst a party is not obliged to invoke Art 33(3), he takes the risk that the court would not, in a setting-aside application, exercise its discretion to set aside any part of the award or invoke the powers of remission under Art 34(4) of the Model Law. However, as this question was not before this court and we did not have the benefit of parties’ argument on this, this question will have to be definitively resolved on a future occasion when it is necessary to do so.
117. In future cases, however, the applicant’s reasons for failing to resort to Art 33(3) (where applicable) might have an impact upon whether the courts will exercise its discretion to set aside an award under Art 34 of the Model Law.
- Counsel for Blanalko sought to distinguish BLC v BLB on the basis that the issue not dealt with and comprised less than 3% of the total claim. This was contrasted with the total of the Supreme Court Costs, which were said to be in the range of $1.1 to $1.2 million. Without more, the differences in the amount or proportion of the claim that the omitted issue represents is irrelevant. It has no bearing on the principles that apply and the circumstances of a particular application of s 33(3) of the Model Law do not prevent the application of those principles to similar circumstances. In any event, as I have already indicated, s 33(5) of the CAA was not able to be invoked in the present circumstances, hence the failure by Blanalko to do so has no consequences.
Procedural unfairness is necessary for a decision not to decide to be set aside under section 34(2)(a)(iii)
- Counsel for Blanalko referred to CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK, which stated that Art 34(2)(a)(iii) of the Model Law does apply to failures to decide issues before the tribunal:
It is useful, at this juncture, to set out some of the legal principles underlying the application of Art 34(2)(a)(iii) of the Model Law… [I]t applies where the arbitral tribunal improperly decided matters that had not been submitted to it or failed to decide matters that had been submitted to it. In other words, Art 34(2)(a)(iii) addresses the situation where the arbitral tribunal exceeded (or failed to exercise) the authority that the parties granted to it.
- Yet as counsel for Lysaght helpfully observed, this principle was not without a proviso:
[I]t must be noted that a failure by an arbitral tribunal to deal with every issue referred to it will not ordinarily render its arbitral award liable to be set aside. The crucial question in every case is whether there has been real or actual prejudice to either (or both) of the parties to the dispute.
While Blanalko maintained that the prejudice arose in being unable to obtain an award for costs to which it is substantively entitled, Lysaght, while not denying the substantive unfairness, submitted that “real or actual prejudice” had to be prejudice in a procedural sense.
- In TCL Air Conditioner (Zhongshan) Company Ltd v Castel Electronics Pty Ltd, the Full Court of the Federal Court found that:
[I]n CRW Joint Operation VK Rajah JA, delivering the judgment of the Court at –, expressed the balance between finality and interference in a helpful way, emphasising that whilst courts should not interfere lightly in the arbitral process, due process (and fairness accordingly) was fundamental, and the Court should not hesitate to interfere if a ground under Art 34 were clearly established. Later in the reasons, the Court expressed the view at  that if the existence of a ground under Art 34 were made out the exercise of discretion would be “virtually automatic”. With respect, care needs to be taken when one is dealing with the rules of natural justice. As long as one recognises and emphasises that there is likely to be no breach of such rules unless real unfairness or real practical injustice be demonstrated, the expression of the matter thus will not mislead. There is sometimes, however, a tendency of some to speak of a technical or minor breach of the rules of natural justice: see for instance the primary judge here at J. To the extent that such expression may be acceptable in some contexts, it will be important to recognise that for the discretion under Arts 34 and 36 to be exercised, real unfairness or real practical injustice will need to be demonstrated. Whilst the IAA does not use phraseology of “prejudice” as does the Singapore Act, such a notion inheres in the conceptions of fairness, unfairness, practical justice and practical injustice. Thus, the expression of view by the Court in Soh Beng Tee at  that “only meaningful breaches of the rules of natural justice that have actually caused prejudice are ultimately remedied” can be seen to be concordant with a notion that real unfairness or real practical injustice must be demonstrated.
Thus, if a failure to decide all of the matters within an arbitrator’s reference may leave an award vulnerable to being set aside under s 34(2)(a)(iii), the failure to decide the relevant matters must occasion substantial prejudice in the procedural sense.
- It is plain that Blanalko was afforded procedural fairness. The settlement deed, which referred the issue of costs to arbitration, provided that Blanalko would put on short evidence as to costs. Following the delivery of the interim award on 15 June 2016, the arbitrator gave the parties seven days to make written submissions on costs. There was no objection by either party to the absence of oral submissions on the issue. The parties submissions were conveyed to the arbitrator on 22 July 2016, after which there was a further exchange of submissions before 1 August 2016. In its submissions of 22 July, Lysaght submitted that:
[T]he Tribunal has been provided with no evidentiary basis on which to determine such a claim concerning the events and conduct of the litigation, which as a matter of law, comprised a distinct and separate legal proceeding to the arbitration.
Consequently, Blanalko cannot maintain that it was unaware of the case against it or that it was denied procedural fairness. Indeed, this may be why they did not bring an application for the award to be set aside on the basis of a lack of procedural fairness under s 34(2)(a)(ii) of the CAA.
- On 22 August 2016, Lysaght’s solicitors wrote to Blanalko’s solicitors:
Our client does not agree with your proposed approach to the costs of the Supreme Court proceedings.
It seems to us that the correct analysis is that the costs of the arbitration were referred to Mr Gillard under the Settlement Deed. Mr Gillard has determined that there was not enough evidence before him to enable him to make a decision. Your client has failed to discharge the onus it bore to prove its claimed entitlement to the Supreme Court costs. Mr Gillard has delivered a final award and is functus officio.
Lysaght maintained this position at trial, save for their analysis of when the arbitrator was functus officio, which they contended was 30 days after delivery of the final award. While Blanalko may complain that they were misled, s 32 of the CAA is clear.
- In my view, the preceding discussion, while of relevance to particular circumstances of the kind the subject of the CRW Joint Operation proceedings, is not applicable in the present circumstances where the Award properly characterised is not a final award and, consequently, there is no basis for invoking any setting aside grounds under s 34 with respect to the outstanding claim with respect to the Supreme Court Costs.
Proper characterisation of the Award
- In my view, as indicated in the preceding reasons, the key to the resolution of these proceedings is the proper characterisation of the Award.
- Mustill and Boyd address the substantive requirements of an arbitral award which, relevantly for present purposes, include the requirement of finality, in the following terms:
The arbitrator should dispose of all the issues himself, and should not leave some of them to be decided by a third party: for if he does, the award is not final, and is invalid. There is a possible exception to this principle, where the decision reserved is of a “ministerial” rather than a judicial character. If this distinction still exists, it is of a very limited application, and the arbitrator should not rely upon it, but should decide all the issues himself. Not only should the arbitrator avoid the delegation of issues to third parties, but he should also take care not to reserve matters for his own future decision, for his award will be bad for want of finality: unless, of course, he wishes to issue an interim award, in which case he should make it clear what the award is intended to do.
Reference was made to all or part of this passage in Blanalko’s submissions.
- In considering this statement of the law and the authorities upon which it is based, it must be remembered that it was written prior to the enactment of the English Arbitration Act 1996—a piece of legislation that was very much the product of the work of the Departmental Advisory Committee which was chaired by Sir Michael Mustill (as his Lordship then was). In light of this, it is important to have regard to the provisions of s 68 of the English Arbitration Act 1996, which provides for the challenging of an award on the basis of serious irregularity:
Section 68—Challenging the Award: Serious Irregularity
68.—(1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award.
A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3).
(2) Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant—
(a) failure by the tribunal to comply with section 33 (general duty of tribunal);
(b) the tribunal exceeding its powers (otherwise than by exceeding its substantive jurisdiction: see section 67);
(c) failure by the tribunal to conduct the proceedings in accordance with the procedure agreed by the parties;
(d) failure by the tribunal to deal with all the issues that were put to it;
(e) any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award exceeding its powers;
(f) uncertainty or ambiguity as to the effect of the award;
(g) the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy;
(h) failure to comply with the requirements as to the form of the award; or
(i) any irregularity in the conduct of the proceedings or in the award which is admitted by the tribunal or by any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award.
(3) If there is shown to be serious irregularity affecting the tribunal, the proceedings or the award, the court may—
(a) remit the award to the tribunal, in whole or in part, for reconsideration,
(b) set the award aside in whole or in part, or
(c) declare the award to be of no effect, in whole or in part.
The court shall not exercise its power to set aside or to declare an award to be of no effect, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration.
(4) The leave of the court is required for any appeal from a decision of the court under this section.
- For present purposes, the provisions of s 68 which are of significance are contained in sub-s 68(2)(d): “failure by the tribunal to deal with all the issues that were put to it”. Whilst these provisions would appear to reflect the previous common law position, as stated by Mustill and Boyd, these provisions are not to be found in the setting aside provisions of s 34 of the CAA. This is not to say that the provisions of s 34 leave the common law in this respect intact—clearly they do not, having regard to the provisions of s 5 of the CAA with respect to the limited extent of court intervention permitted in the arbitral process and the limited powers of remittance conferred on the Court under s 34. Rather, the significance of the common law position—which, in my view, subsists to this extent—is that a deliberate and articulated decision by an arbitrator not to deal with all issues which are within the arbitral mandate does not produce a final award. The consequences of not doing so are now, as contrasted with the common law position, different and more constrained by the provisions of s 34 of the CAA—but the position remains that the award, properly characterised, is not final.
- Against this background it is helpful to consider some of the authorities cited by Mustill and Boyd in support of their statement of the law; together with some later cases in which these authorities have been considered.
- In Tomlin v Fordwich Corporation, the arbitrators awarded that the defendant should put the subject premises in repair to the satisfaction of a third party. It was held that the arbitrators could not confer power on a third party; hence the award not being final was bad. Similarly, in Johnson v Latham, it was held that the award was not final as it contained a direction that for the purposes of defining and perpetuating the depth at which the defendant might maintain the weir, “such durable marks and directions be placed on the land adjoining the weir as [a third party] may direct”. The direction was found to be a delegation of the arbitrator’s authority, hence bad. Similar issues were canvassed in Goddard v Mansfield with respect to a delegation by the umpire to a third party to settle certain releases. The award was upheld but the direction with respect to the settling of the releases was vitiated. In Dresser v Finnis, a dispute as to the merchantable quality of sleepers, the award was found to be bad for want of finality as a result of what was found to be the imposition of selling process which imposed a duty on the parties more complex and over which the plaintiff had no control. It was found that the arbitrator had given the plaintiff no effectual remedy. Johnson v Latham has been referred to in other cases on issues not directly on point for present purposes, but not otherwise doubting the decision.
- The other case referred to by Mustill and Boyd in their statement of the law is Stockport Metropolitan Borough Council v O’Reilly. In the present context, this case stands for the proposition that an interim award will be bad for uncertainty if it does not clearly delimit its ambit. Otherwise, Judge Edgar Jay said:
This was an interim award; in so far as it reaches findings, it is binding but in so far as it does not, the issues are still open.
- On the basis of this discussion and consideration of the authorities and the preceding reasons with respect to the proper characterisation of the Award, I find that, in spite of its labelling, it was clearly not a final award. The Award did not decide all issues put to the arbitrator within the arbitrator’s mandate and did not involve an order or direction that might be characterised as an invalid delegation of power to a third party. At common law the Award is not final, but the consequences that might have flowed at common law—or under s 68 of the English Arbitration Act 1996—do not now flow having regard to the provisions of ss 5 and 34 of the CAA. The arbitration agreement does, as I have found, subsist and so the arbitrator’s mandate remains with respect to the issue of the Supreme Court Costs.
- Consequently, Blanalko’s application in the 2016 proceedings under s 34(2)(a)(iii) of the CAA fails. Lysaght’s application for a stay under s 8 of the CAA of Blanalko’s application for costs in the 2012 proceedings is successful. Moreover, the arbitrator’s mandate under the arbitration agreement subsists as the Award is not, properly characterised, a final award. It follows that it is open to either Blanalko or Lysaght to apply to the arbitrator to engage the arbitral procedure once more for the determination of the Supreme Court Costs claim.
- The parties are to bring in orders to give effect to these reasons. I otherwise reserve the question of costs.