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Mango Boulevard Pty Ltd v Mio Art Pty Ltd[2017] QSC 87

Reported at [2018] 1 Qd R 245

Mango Boulevard Pty Ltd v Mio Art Pty Ltd[2017] QSC 87

Reported at [2018] 1 Qd R 245

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Mango Boulevard P/L v Mio Art P/L & Ors [2017] QSC 87

PARTIES:

MANGO BOULEVARD PTY LTD

(applicant)

v

MIO ART PTY LTD

(respondent)

FILE NO/S:

BS9991/16 & BS1383/17

DIVISION:

Trial Division

PROCEEDING:

Originating Application

DELIVERED ON:

18 May 2017

DELIVERED AT:

Brisbane

HEARING DATE:

12 April 2017

JUDGE:

Jackson J

ORDER:

The order of the court is that:

1. The application is dismissed.

CATCHWORDS:

ARBITRATION – CONDUCT OF THE ARBITRATION PROCEEDINGS – THE AWARD – APPEAL OR JUDICIAL REVIEW – POWERS OF THE COURT – POWER TO SET ASIDE OR REMIT – where a reference to arbitration was made under a contract between the applicant and the respondent – where the arbitrator made two awards under the reference – where the applicant applied to set aside the awards under s 34 of the Commercial Arbitration Act 2013 (Qld) – where the respondent argued that if the application was granted the court should suspend the setting aside of proceedings to give the arbitrator an opportunity to resume the arbitral proceedings – whether the court has the power to remit the proceedings to the arbitrator after setting aside the award under the Commercial Arbitration Act 2013 (Qld)

ARBITRATION – CONDUCT OF THE ARBITRATION PROCEEDINGS – THE AWARD – APPEAL OR JUDICIAL REVIEW – GROUNDS FOR REMITTING OR SETTING ASIDE – WANT OF JURISDICTION AND EXCESS OF AUTHORITY – where a reference to arbitration was made under a contract between the applicant and the respondent – where the arbitrator made two awards under the reference – where the applicant applied to set aside the awards under s 34 of the Commercial Arbitration Act 2013 (Qld) – where the reference asked the arbitrator to apply the valuation method set out in the contract between the parties – where the contract required a market valuation to be performed and required the valuer to assume that the project would return a profit on cost of 25% - whether the arbitrator went outside the agreed contractual methodology in valuing the property

ARBITRATION – CONDUCT OF THE ARBITRATION PROCEEDINGS – THE AWARD – APPEAL OR JUDICIAL REVIEW – GROUNDS FOR REMITTING OR SETTING ASIDE – MISCONDUCT – DENIAL OF NATURAL JUSTICE - where a reference to arbitration was made under a contract between the applicant and the respondent – where the arbitrator made two awards under the reference – where the applicant applied to set aside the awards under s 34 of the Commercial Arbitration Act 2013 (Qld) – where the applicant argued that the arbitrator rejected witness evidence and made findings on the basis of points which were not raised with the witness or the applicant’s counsel – where the applicant argued that the arbitrator acted in a procedurally unfair way by making a finding of costs that was outside the range of the values advanced by the applicant and the respondent – whether the award should be set aside on the basis that there had been a denial of natural justice or procedural fairness

Commercial Arbitration Act 2013 (Qld)

Commercial Arbitration Act 2011 (Vic)

International Arbitration Act 1974 (Cth)

AGL Victoria Pty Ltd v SPI Networks (Gas) Pty Ltd (formerly Txu Networks (Gas) Pty Ltd) and anor [2006] VSCA 173, distinguished

AKN & Anor v ALC & Ors [2015] SGCA 63, applied

Alvaro v Temple [2009] WASC 205, cited

Amalgamated Television Services Pty Ltd v Marsden (No 2) [2003] NSWCA 186, cited

Amasya Enterprises Pty Ltd v Asta Developments (Aust) Pty Ltd [2016] VSC 326, followed

Ashby v Slipper (2014) 219 FCR 322, distinguished

Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485, cited

Bale v Mills (2011) 81 NSWLR 498, distinguished

Burne v Young (High Court of New Zealand, Wellington, CP 68/89, 29 May 1991), approved

Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10, cited

Fox v PG Wellfair Limited [1981] 2 Lloyd's Rep 514, discussed

Holt and anor v Cox (1997) 23 ACSR 590, cited

Interbulk Ltd v Aiden Shipping Co Ltd [1985] 2 Lloyd’s Rep 410, cited

Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361, distinguished

Legal & General Life of Australia v A Hudson Pty Ltd [1985] 1 NSWLR 314, distinguished

Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 348, cited

Mango Boulevard P/L & Anor v Mio Art P/L & Ors [2013] QCA 271, discussed

Mio Art Pty Ltd v Mango Boulevard Pty Ltd and Ors (No 2) [2012] QSC 348, discussed

re Scibilia and Lejo Holdings Pty Ltd Arbitration [1985] 1 Qd R 94, cited

Sino Dragon Trading Ltd v Noble Resources International Pte Ltd [2015] FCA 1028, followed

State of New South Wales v Hunt (2014) 86 NSWLR 226, distinguished

Tang Boon Jek Jeffrey v Tan Poh Leng Stanley [2001] 2 SLR (R) 273, not followed

TCL Air Conditioner v Castel (2014) 232 FCR 361, applied

Trustees of Rotoaira Forest Trust v Attorney-General [1999] 2 NZLR 452, approved

Tyler v Thomas [2006] FCAFC 6, distinguished

COUNSEL:

D Kelly QC and M Hodge for the applicant

D Keane and S Colditz for the respondents

SOLICITORS:

Carter Newell for the applicant

Delta Law for the respondent

  1. Jackson J: These are two applications to set aside arbitral awards.  Both the awards were made on a reference to arbitration made by the parties under cl 4.9 of a contract described as the share sale agreement (“SSA”).  Before the arbitration, the parties litigated a dispute in this court about whether the relevant clauses of the SSA under which the arbitration would take place were engaged.[1]
  1. On 14 November 2012, P McMurdo J gave judgment on part of that claim.[2]
  1. On 20 September 2013, the Court of Appeal dismissed an appeal and cross-appeal.[3]
  1. In or about September 2013, the parties consented to the appointment of the arbitrator.  
  1. On 31 March 2015, the arbitrator’s agreement was executed by the parties. 
  1. From 6 December 2013 until 5 May 2016, there were directions, hearings and submissions.
  1. On 29 June 2016, the arbitrator made an award, described as the award Pt 1.
  1. On 28 September 2016, the applicant applied to set aside the award Pt 1. 
  1. On 8 December 2016, the arbitrator made a second award, described as the award Pt 2.
  1. On 13 February 2017, the applicant applied to set aside the award Pt 2.
  1. The reference is not yet concluded by a final award, because the question of costs has not been decided.
  1. In a practical sense, the award Pt 2 depends on the award Pt 1, so the question which will decide both applications is whether the award Pt 1 should be set aside.

Setting aside under the Commercial Arbitration Act 2013 (Qld)

  1. The Commercial Arbitration Act 2013 (Qld) (“CAA”) governs the arbitration.  
  1. The power to set aside the award Pt 1, if any, is conferred by s 34 of the CAA.  Relevant parts of s 34 provide:

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

…

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

  1.  the party making the application furnishes proof that—
  1.  …
  1.  the party making the application was … otherwise unable to present the party’s case; or
  1.  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, …
  1.  the Court finds that—

…

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

  1. The grounds that were pressed at the hearing[4] fall into two categories.  First, the applicant contends that the award deals with a dispute not contemplated or not falling within the terms of the submission to arbitration or contains decisions on matters beyond the scope of the submission to arbitration.  Second, the applicant contends that the arbitrator failed to accord procedural fairness or acted in breach of the rules of natural justice in a number of respects which constitute grounds for finding that the applicant was unable to present its case or the award is in conflict with the public policy of this State. 
  1. It will be necessary to consider the grounds in some detail.  But at the outset it is useful to identify the questions that were argued:  first, whether the applicant has made a case for setting aside the award on the stated grounds; second, if so, whether the court should suspend the setting aside of the arbitral proceedings to give the arbitrator an opportunity to resume the arbitral proceedings or to take other action as in the arbitrator’s opinion will eliminate the grounds for setting aside; and third, whether an order setting aside the award would terminate the arbitrator’s jurisdiction or mandate to the extent of the matters dealt with in the award. 
  1. These questions turn on the court’s powers on an application made under s 34 or otherwise under the CAA.  They raise points as to the status of an arbitral award under the CAA which have not arisen for decision before in this State, although there are relevant decisions elsewhere.

Operation of the Model Law

  1. The UNCITRAL Model Law on International Commercial Arbitration (as adopted by the UN Commission on International Trade Law on 21 June 1985 with amendments as adopted by that commission in 2006) (“Model Law”) forms the basis of the CAA.[5]
  1. The Model Law was first applied in Australia under the International Arbitration Act 1974 (Cth).  All of the States and Territories followed,[6] applying the Model Law to domestic arbitration and repealing previous legislative regimes.    It follows that decisions in the other States and Territories and the Federal Court of Australia on indistinguishable provisions are not only persuasive but where they are decisions of an intermediate appellate court should be accorded the precedential value recognised in Australian Securities Commission v Marlborough Gold Mines Ltd.[7]
  1. The significance of the CAA's provenance was extensively explained by Croft J in relation to the Victorian Act in Amasya Enterprises Pty Ltd v Asta Developments (Aust) Pty Ltd.[8] Despite the length of the following passage, it is worth repeating as applying to the CAA as follows:

"... The relevant legislative context was considered in Cameron Australasia Pty Ltd v AED Oil Ltd (“Cameron”), a case which also involved concurrent applications to enforce and set aside arbitral awards under ss 34 and 36 of the Act.  It is convenient to recall this discussion as follows:

'In terms of overall context and provenance, it is critical to have regard to ss 1AC and 2A of the Act.  These provisions are as follows:

1AC     Paramount object of Act

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

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

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

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

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

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

…

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

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

(2) [omitted]

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

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

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

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

Note

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

Apart from providing a paramount object — a ‘guiding star’ — for the interpretation of the provisions of the Act, s 1AC also reflects the philosophy and approach of the international instrument which the provisions of the Act reflect and substantially reproduce in the same terms. 

The international instrument in question is the product of the work of ... ‘the Model Law’. 

The United Nations General Assembly recommended that—

'all States give due consideration to the Model Law … in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice.'

The Model Law was amended ... in December 2006.  Again, the General Assembly resolved that all States ‘give favourable consideration’ to enacting the revised articles of the Model Law.

The Victorian Parliament made clear its intention to enact the Model Law in the ‘Note’ which appears in the preliminary part of the Act, in the following terms:

'Sections of this Act that contain a reference to the ‘Model Law’ in the heading are substantially the same as the provisions of the UNCITRAL Model Law on International Commercial Arbitration … so as to be as uniform as possible with the UNCITRAL Model Law.  Some changes have been made to those provisions of the Act based on the UNCITRAL Model Law to amend or supplement the provisions in their application to domestic arbitrations in Victoria or to accommodate modern drafting styles and conventions (for example, provisions are drafted in gender neutral terms and archaisms are replaced with modern alternatives). Notes draw attention to substantive changes.'

The international provenance of the Act was confirmed by the Court of Appeal in Subway Systems Australia Pty Ltd v Ireland, where Maxwell P, after setting out s 2A, said:

'The Victorian Parliament here expressed its intention that the interpretation of the Victorian Act should ensure 'so far as practicable' that there was uniformity between:

(a) the application of the Victorian Act to domestic commercial arbitrations; and

(b) the application of the provisions of the Model Law (as enacted at the Commonwealth level) to international commercial arbitrations.

The Commonwealth Act is the International Arbitration Act 1974 (Cth).  It has the following objects:

2D        Objects of this Act

The objects of this Act are:

(a) to facilitate international trade and commerce by encouraging the use of arbitration as a method of resolving disputes; and

(b) to facilitate the use of arbitration agreements made in relation to international trade and commerce; and

(c) to facilitate the recognition and enforcement of arbitral awards made in relation to international trade and commerce; and

(d) to give effect to Australia’s obligations under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted in 1958 by the United Nations Conference on International Commercial Arbitration at its twenty-fourth meeting; and

(e) to give effect to the UNCITRAL Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law on 21 June 1985 and amended by the United Nations Commission on International Trade Law on 7 July 2006; and

(f) to give effect to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States signed by Australia on 24 March 1975.

As will appear, uniformity of interpretation across jurisdictions has been viewed as of paramount importance where a treaty (or a law implementing a treaty) is concerned with international commerce.  It is therefore significant that the Victorian Parliament has expressed its own intention that the application of the Model Law to domestic arbitrations should be in line with its application to international arbitrations.

The fact that the question in issue here is governed by the Victorian embodiment of the Model Law, rather than by the Model Law as implemented by another State or by the Commonwealth, emphasises the importance of uniformity.  The fact that an international supplier of goods and services will very likely be subject, in a federation like Australia, to the laws of different States would seem to be a powerful argument for ensuring uniformity ‘so far as practicable’.’

The only provisions in the Model Law which provide for recourse against an arbitral award are contained in art 34, which is reflected in s 34 of the Act...

Article 36 of the Model Law sets out the grounds upon which recognition or enforcement of an arbitral award may be refused by a court—grounds which substantially mirror those upon which an award may be set aside.  Article 36 of the Model Law is reflected in s 36 of the Act...

In TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (“TCL”), the Full Federal Court said that an arbitral award will not be set aside or refused recognition or enforcement under arts 34 and 36 of the Model Law—

'unless there is demonstrated real unfairness or real practical injustice in how the international litigation or dispute resolution was conducted or resolved, by reference to established principles of natural justice or procedural fairness.  The demonstration of real unfairness or real practical injustice will generally be able to be expressed, and demonstrated, with tolerable clarity and expedition.'

This position is modified to some extent by ss 34 and 34A of the Act.  The provisions of s 34A were explained in Cameron as follows:

'The reference [in s 34 of the Act] to s 34A is a reference to a provision which appears only in the Act with respect to arbitrations within the ambit of its provisions, namely, domestic arbitrations.  It is not a provision which is reflected in the International Arbitration Act 1974 (Cth), which, broadly speaking, enacts the provisions of the Model Law for the purpose of international commercial arbitrations.  The provisions of s 34A of the Act allow for an appeal on a question of law arising out of an arbitral award, but only in limited circumstances, and only on an ‘opt-in’ basis.  Appeals against domestic arbitral awards on questions of law have a long history, both in England and in Australia.  Having regard to this history, it is unsurprising that it was thought appropriate to include limited provision for appeals on questions of law arising out of domestic arbitral awards in these terms; but to maintain the quite limited recourse against awards and provisions for refusal of recognition or enforcement of arbitral awards in terms of arts 34 to 36 of the Model Law with respect to international commercial arbitration.

Having regard to these matters and the inclusion of specific provisions for appeals on a question of law in s 34A, it is clear from the structure of the Act that the provisions of s 34 contemplate quite limited court intervention and nothing in the nature of an appeal on a question of law.  Moreover, international jurisprudence with respect to Model Law art 34, from which s 34 of the Act is derived, make this abundantly clear.  …'

Further to the provisions of s 34A of the Act, commercial parties may also choose to agree to appeal procedures within the scope of the referral to arbitration itself.  For example, the Arbitrators’ and Mediators’ Institute of New Zealand (“AMINZ”) Arbitration Appeal Rules provide for detailed procedures which enable commercial parties to agree to allow appeals on questions of law to an arbitral appeal tribunal.  A similar kind of appeal regime could also be achieved on an ad hoc basis, as agreed by the parties.  In the context of the present dispute, the parties chose not to provide for an appeal of the kind contemplated by s 34A of the Act, nor did they agree to an appeal procedure of the kind provided for in the AMINZ Arbitration Appeal Rules in their arbitration agreement. Moreover, at the time of hearing these applications, the parties had not exercised their rights under s 34A of the Act to appeal to the Court on a question of law.

Further, the task of considering the relevant legislative context of ss 34 and 36 of the Act also includes having regard to the nature of the Court’s power to intervene in the arbitral sphere and the judicial approach to be taken to the kinds of applications presently before the Court.  These matters were considered in Indian Farmers Fertiliser Cooperative Ltd v Gutnick (“Gutnick”)in the context of an enforcement application under the International Arbitration 1974 (Cth) (“the International Act”).  In light of the international provenance of the Victorian Act, the following extracts are also relevant in the present context.  In the Gutnick case, I said:

'I turn now to the nature of the Court’s enforcement power, and the judicial approach mandated by the [International] Act.  In TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia, French CJ and Gageler J—in the context of finding that s 8 of the [International] Act did not contravene Chapter III of the Constitution—said:

‘Enforcement of an arbitral award is enforcement of the binding result of the agreement of the parties to submit their dispute to arbitration, not enforcement of any disputed right submitted to arbitration.’

In a similar vein, Hayne, Crennan, Kiefel and Bell JJ said:

‘To conclude that a particular arbitral award is final and conclusive does no more than reflect the consequences of the parties having agreed to submit a dispute of the relevant kind to arbitration.'

This means that the role of the courts under the [International] Act is understood to be limited to the enforcement of contractual obligations—that is, holding the parties to their bargain to finally determine disputes using arbitration.  The courts’ role does not involve determining substantive disputes between the parties as to fact or law, or otherwise reviewing the decision of an arbitral tribunal.  This position was recently reinforced in Sauber Motorsport AG v Giedo van der Garde BV, where the Court of Appeal, adopting the analysis of the Full Federal Court in TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd, said:

‘Courts should not entertain a disguised attack on the factual findings or legal conclusions of an arbitrator “dressed up as a complaint about natural justice”.  Errors of fact or law are not legitimate bases for curial intervention.  Unfairness in any particular case will depend upon context, and all the circumstances of that case.’

In further consideration of the appropriate judicial approach in such cases, the Full Federal Court said in TCL that:

'[I]t is not only appropriate, but essential, to pay due regard to the reasoned decisions of other countries where their laws are either based on, or take their content from, international conventions or instruments such as the New York Convention and the Model Law.  It is of the first importance to attempt to create or maintain, as far as the language employed by Parliament in the [Act] permits, a degree of international harmony and concordance of approach to international commercial arbitration.  This is especially so by reference to the reasoned judgments of common law countries in the region, such as Singapore, Hong Kong and New Zealand.'

In light of this statement, it is significant that two of the leading arbitration jurisdictions in the Asia-Pacific region, Singapore and Hong Kong, also adopt a policy of minimal curial intervention in arbitration matters.  In Grand Pacific Holdings Ltd v Pacific China Holdings Ltd (in liq) (No 1), the Hong Kong Court of Appeal, with respect to an application to set aside an award under art 34 of the Model Law—which, the court noted, is not materially distinguishable from refusal to enforce under art 36—said:

'The Court’s approach to such application is not controversial.  The Court is concerned with “the structural integrity of the arbitration proceedings”.  The remedy of setting aside is not an appeal, and the Court will not address itself to the substantive merits of the dispute, or to the correctness or otherwise of the award, whether concerning errors of fact or law.'

In a similar vein, the Chief Justice of Singapore, Menon CJ, delivering the judgment of the Singapore Court of Appeal in AKN v ALC, said:

'A critical foundational principle in arbitration is that the parties choose their adjudicators. Central to this is the notion of party autonomy.  Just as the parties enjoy many of the benefits of party autonomy, so too must they accept the consequences of the choices they have made.  The courts do not and must not interfere in the merits of an arbitral award and, in the process, bail out parties who have made choices that they might come to regret, or offer them a second chance to canvass the merits of their respective cases.  This important proscription is reflected in the policy of minimal curial intervention in arbitral proceedings, a mainstay of the Model Law and the [International Arbitration Act (Singapore, cap 143A, 2002 rev ed)].

In particular, there is no right of appeal from arbitral awards.  That is not to say that the courts can never intervene.  However, the grounds for curial intervention are narrowly circumscribed, and generally concern process failures that are unfair and prejudice the parties or instances where the arbitral tribunal has made a decision that is beyond the scope of the arbitration agreement.  It follows that, from the courts’ perspective, the parties to an arbitration do not have a right to a “correct” decision from the arbitral tribunal that can be vindicated by the courts.  Instead, they only have a right to a decision that is within the ambit of their consent to have their dispute arbitrated, and that is arrived at following a fair process.

In the light of their limited role in arbitral proceedings, the courts must resist the temptation to engage with what is substantially an appeal on the legal merits of an arbitral award, but which, through the ingenuity of counsel, may be disguised and presented as a challenge to process failures during the arbitration.  …’

In Robotunits Pty Ltd v Mennel, after referring to this statement of principle by Menon CJ, I said:

'This is an important illustration of the need for courts to resist the temptation of ‘domesticity’ in approaching matters involving Model Law and/or New York Convention based legislation.  In other words, courts must resist the temptation to approach such matters through the prism of principles and doctrines not found in the Model Law or the New York Convention, and which may be peculiar to a particular domestic jurisdiction.'

Like all temptation, adopting a domestic approach may be attractive in the short-term, but ultimately has the potential to interfere with broader, longer-term objectives.  Chief among these long-term objectives in the present context is the promotion of international uniformity in international commercial arbitration practice referred to in TCL.  …'"[9] (footnotes omitted).

Finality of the award

  1. Section 5 of the CAA provides that in matters governed by the Act no court must intervene except where so provided by the Act. 
  1. Section 28(1) of the CAA provides that the arbitral tribunal must decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute.  Section 31(1) provides that the award must be made in writing and must be signed by the arbitrator.  The balance of the section provides for other requirements or contents of the award, including by s 31(3) that the award must state the reasons upon which it is based unless the parties have agreed that no reasons are to be given or the award is an award on agreed terms under s 30.
  1. Section 32(1) provides as follows:

“The arbitral proceedings are terminated by the final award or by an order of the arbitral tribunal in accordance with subsection (2).”

  1. Subsection (2) provides for termination when a claimant withdraws the claim or the parties agree or the arbitral tribunal finds continuation impossible or unnecessary or there is dismissal under s 25(2)(a). 
  1. Section 32(3) provides:

“The mandate of the arbitral tribunal terminates with the termination of the arbitral proceedings, subject to sections 33 and 34(4).”

  1. Section 33 provides for the arbitral tribunal in some circumstances to correct, interpret or make an additional award. 
  1. Section 34(4) provides:

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

  1. In my view, the meaning of these provisions is relatively clear.  First, a final award terminates the arbitral proceedings.  That means the mandate of the arbitral tribunal terminates.  But that does not necessarily follow when there is no final award.
  1. Second, an application to set aside an award may be made in respect of a final award and another award that is not a final award, that I will call a “partial award”, so as to designate it separately from the familiar language of an “interim award” as recognised under prior statutory regimes.  On an application to set aside a partial award (or a final award), the court may suspend the proceeding and give the arbitral tribunal an opportunity to resume.  If the arbitral tribunal resumes the arbitral proceedings, it may revisit the subject matter of the award. 
  1. Third, apart from this alternative, if the court proceeds to set aside an award, nothing in the scheme of s 34 of the CAA expressly provides for either a remitter or a new hearing in respect of the award that is set aside.[10] 
  1. The conclusions so far are supported by appellate court authority.  In AKN & Anor v ALC & Ors,[11] the Court of Appeal of the High Court of Singapore (“SGCA”) considered the operation of the International Arbitration Act (“IAA”) of that jurisdiction.  The IAA applied the Model Law.  The SGCA specifically considered whether after setting aside an award under article 34 the court has the power to remit matters to the arbitral tribunal.  The SGCA confirmed an earlier decision that it did not.[12] 
  1. From that point, the SGCA proceeded to consider the status of the jurisdiction of the arbitral tribunal after an order has been made setting the award aside.  The court relied on article 32. However it also relied on s 19B of the IAA.  That provision has no direct counterpart in the CAA.  Notwithstanding that difference, the discussion of principle in AKN supports the application to s 34(4) the CAA of the conclusion reached by the SGCA that “the court has no power to remit an award after it has been set aside” as “founded on the plain words of [section] 34(4) [that] also accords with good sense”[13]. 
  1. The SGCA’s further conclusion was as follows:

“We accordingly hold … that remission is a carefully defined concept in the IAA (Model Law) and that it operates as an alternative to setting aside in the manner we have described … [I]n this case, as we have already upheld the setting aside of certain portions of the award, the question of remission does not arise and, for that matter, cannot arise.”[14]

  1. Next, the SGCA considered whether the arbitral tribunal retained any jurisdiction following the orders setting aside the award.  The SGCA concluded that the arbitral tribunal has no continuing jurisdiction in relation to the matters dealt with by the award.  Again, the conclusion was clearly expressed:

“There is simply nothing to warrant the conclusion that where an order has been set aside, the tribunal which made that award would somehow resume the ability and mandate to determine afresh the matters that have been dealt with in the award.  But, as alluded to above, this goes to the mandate of that particular tribunal.  The fact that the award has been set aside would not, in and of itself, affect the continued validity and force of the arbitration agreement between the parties, save for the situation where the award was set aside on the ground that there was no arbitration agreement between the parties.”[15]

  1. The outcome on an order to set aside an award made under s 34 of the CAA is that the arbitral proceedings are set at naught but the parties to the arbitration agreement may be able to refer the dispute again. 
  1. This conclusion may be distinguished from cases decided under earlier statutory regimes.  From 1867 until 2013, in this State, there was a general statutory power in the court to remit a reference to arbitration for reconsideration.[16] There is no longer such a statutory power.  Cases decided under such powers no longer apply. 
  1. Under the prior statutes or their comparators, where an order of remitter was made the law as to the status of the award was unclear.[17]  But again, the statutory powers under which such questions arose no longer apply, except possibly under s 34A of the CAA but that section is not under consideration in this case.
  1. Also under the prior statutes or their comparators, remitter was often ordered where an award was set aside.  There was a question as to the court’s power to remit to a differently constituted arbitral tribunal[18] and, if such an order were made, whether new arbitrators could treat the proceedings before the old tribunal as continuing.[19]  The cases decided under repealed statutory regimes on these questions also no longer apply.
  1. Section 15 of the CAA provides:

“Where the mandate of an arbitrator terminates under section 13 or 14 or because of the arbitrator’s withdrawal from office for any other reason or because of the revocation of the arbitrator’s mandate by agreement of the parties or in any other case of termination of the arbitrator’s mandate, a substitute arbitrator must be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.”

  1. The rules that were applicable to the appointment of the arbitrator being replaced are those provided for in the agreement of the parties as regulated by ss 11 to 14 of the CAA.  There is no longer a general power in the court to replace an arbitrator under the CAA.
  1. The respondents submit that if an order to set aside the award were made under s 34 that would not bring an end to the jurisdiction of the arbitral tribunal or the arbitral proceeding.  First, they submit that setting aside a partial award would return the parties to the position they were in immediately before the award was made.  Second, they submit that setting aside a final award would lift the effect that a final award has of terminating the arbitral proceedings under s 32(1) and lift the effect of termination of the mandate of the arbitral tribunal that follows under s 32(3). 
  1. If either of those submissions were correct, there would be no need for s 34(4) to provide that the court can suspend the setting aside of proceedings in order to give the arbitral tribunal the opportunity to resume the arbitral proceedings.   Accordingly, in my view, the decision of the SGCA in AKN was correct, for the reasons given by that court, subject to two possible points of difference in the local legislation. 
  1. The first point is that s 34A of the CAA provides that in the case of an appeal (as opposed to an application to set aside) the court may by order remit the award to the arbitrator for reconsideration or “where a new arbitrator has been appointed to that arbitrator for consideration”.  That provision assumes that in making orders on the determination of an appeal a new arbitrator may be appointed in some way.  That is not a power conferred expressly elsewhere in the CAA, except in the circumstances provided for under s 11(3) and (4) of the CAA.  Those subsections provide, in effect, that where an appointment procedure is agreed by the parties but the procedure fails any party may request the court to take the measure.  Otherwise, appointment of a substitute arbitrator is provided for in cases of termination of the arbitrator’s mandate “according to the rules that were applicable to the appointment of the arbitrator being replaced” under s 15 of the CAA. 
  1. Returning to s 34(4) of the CAA, the resumption provided for is that of “the arbitral tribunal” not a “new arbitrator [who] has been appointed”.  Notwithstanding this anomaly introduced by the text of s 34A, in my view, the conclusion reached by the SGCA in AKN in relation to the operation of the Model Law as applied under the IAA also applies to the operation of the relevant provisions, including s 34, of the CAA in this State.
  1. The second point is that there is no section of the CAA that corresponds to s 19B of the IAA in Singapore.  That section was apparently introduced to reverse the effect of Tang Boon Jek Jeffrey v Tan Poh Leng Stanley,[20] which concerned the power of an arbitrator to revisit a partial award under the IAA.  The SGCA held that because there was no final award within the meaning of s 32 of the Model Law, the arbitrator could revisit a partial award.  In my view, Tang should not be followed under the CAA.  The SGCA did not consider whether a partial award was an award to which s 34 applied.  That was an error. Once that is accepted, as it must be, and the application of ss 33, 34A and Part 8 of the CAA to a partial award are also acknowledged, the result in Tang cannot be accepted.

Resumption of the arbitral proceedings

  1. The respondents request that, if the court were minded to allow the application to set aside the award under s 34(1) and (2) of the CAA, the court should suspend the setting aside of proceedings for a period to give the arbitrator an opportunity to resume the arbitral proceedings.  The applicant submits no order suspending the setting aside should be made, because of the grounds on which it has furnished proof that the arbitral award may be set aside.
  1. The power to suspend the setting aside of proceedings under s 34(4) is one “to give the arbitral tribunal an opportunity to resume the arbitral proceedings”.  It is not a power to substitute or appoint a new arbitrator.[21] 
  1. Consistently with that, the only express powers of the court to appoint an arbitrator in the CAA are those contained in ss 11(3) and (4).  Where the appointment of an arbitrator is challenged under s 13 of the CAA, and the challenge is successful, the termination of the mandate of the arbitrator is to be followed by appointment of a substitute arbitrator under s 15 of the CAA. 
  1. The substitute arbitrator “must be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced”.  Those are the rules provided for under the arbitration agreement and s 11, including the court’s limited power or powers to make appointments under ss 11(3) and (4).  There is no general power at common law to substitute an arbitrator in other circumstances.[22] 
  1. It follows, in my view, that the question whether the court should exercise the power to suspend the setting aside of proceedings under s 34(4) is only loosely analogous to the exercise of a power by a court of appeal to remit proceedings on appeal to a differently constituted court.[23]
  1. In the present case, if the applicant makes out a case for setting aside the award, the alternatives are between suspending the setting aside of proceedings under s 34(4) for a time to give the arbitral tribunal the opportunity to resume the arbitral proceedings and make a further award or setting aside the award and returning the parties to the point of referring their dispute to arbitration before a new arbitral tribunal in respect of the subject matter of the partial award.

Acting in excess of the jurisdiction under the submission

  1. Whether an 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 turns on the terms and scope of the submission. There is a difference between an excess of jurisdiction and a challenge really going to the merits of legal and factual questions, but superficially characterised and cloaked as an excess of jurisdiction question.[24]
  1. According to the arbitrator's agreement, the submission in the present case was to determine "in accordance with the terms of" the SSA "the value of the Property in accordance with clauses 4 and 8 of the" SSA.
  1. The applicant submits that the arbitrator was asked to apply the methodology in cl 4.4 of the SSA.  Clauses 4.1 to 4.4 of the SSA provide:

“4.1 The purchase price of the Shares shall be calculated as the greater of:

  1.  the difference between the purchase price of the Property set out in the Contract and the improved market value of the Property immediately after the Effective Date less $2,000,000.00; or
  1.  $5,000,000.00;

which purchase price shall be reduced by:

  1.  the total amount in respect of the Monthly Development Management Fee (excluding GST) which have been paid by the Company to the Consultant as at the Effective Date;
  1.  the Bank Guarantee Fees (excluding GST).

4.2 Mango Boulevard shall procure that Urbex:

  1.  lodge and prosecute one Development Application in respect of the whole Property, which incorporates a development plan that is appropriate so as to maximise the potential yield of the Property and profit in relation to the Project;
  1.  prosecute and lodge the Development Application as expeditiously as is reasonably possible;  
  1.  use its best endeavours to procure that the Development Application is granted as soon as is reasonably possible, including negotiating in good faith with all referral agencies, stakeholders and interested parties (“Interested Parties‟) to reach reasonable comprises and commercial solutions to any conditions or objections raised by Interested Parties; and
  1.  use its best endeavours to obtain Preliminary Approval and Development Permits in respect of the whole of the Property which are appropriate so as to maximise the potential yield and profit in relation to the Project.

4.3 For the purpose of clause 4.1(a), the valuation of the Property shall be a market valuation. The parties shall consult with each other in an attempt to agree on the market value of the Property immediately after the Effective Date. If, however, the parties are unable to agree on the value of the property within 30 days from the Effective Date, a valuation of the Property shall be carried out by a registered valuer agreed between the parties. If the parties are not able to agree on a registered valuer within 40 days after the Effective Date, any one of the parties may request the president for the time being of the Australian Property Institute to select a valuer from the panel of valuers approved by Mango Boulevard’s financiers at that time (“Valuer‟).

4.4 The Valuer shall value the Property on the assumptions that:

  1.  Development Permits have been issued in respect of the whole Property which authorise the development of the Property on substantially similar terms to the terms of the Preliminary Approval, including substantially similar:
  1.  MCU;
  1.  density per hectare;
  1.  yield; and
  1.  conditions;
  1.  the Project would achieve a Profit on Cost percentage return of 25% (“Valuation”).

The cost of the Valuation shall be borne by Mango Boulevard." (emphasis added)

  1. There are relevant definitions in the SSA of terms, including “Property”, “Profit on Cost”, “Profit”, “Income” and “Cost” but it is not necessary to set them out for present purposes.
  1. Clause 8.3 of the SSA provides that:

“The [arbitrator] in reaching a decision as to the value of the Property must adopt the same methodology as provided in cl 4.4”.

  1. Provided the wider language of the arbitrator's agreement is acknowledged, it may be accepted that cl 4.4 of the SSA was a term of the submission and was relevant to the scope of the submission.  As appears above, clause 4.4 provided that in ascertaining the "improved market value of the Property immediately after the Effective Date" in cl 4.1 and the "market valuation" of the Property under cl 4.3, the arbitrator was required to make the agreed assumptions.
  1. The applicant relies on passages from the reasons for judgment of P McMurdo J in Mio Art Pty Ltd v Mango Boulevard Pty Ltd and Ors (No 2)[25] as settling the terms and scope of the submission.  His Honour said of the residual value method of analysis:

"This methodology was not inconsistent with the SSA. In my view, it was what was required of the valuer, having regard to the assumptions which the valuer was to make according to cl 4.4. Once those assumptions were made, necessarily the valuer was constrained in his assessment of the value. Nevertheless, in the valuer’s opinion this approach did provide a market value of the site. The question is not whether the valuation would have been the same, unconstrained by the assumptions imposed by cl 4.4."[26]

  1. The applicant pressed this passage because of its reference to the constraint that cl 4.4 imposes on the assessment of value. 
  1. The Court of Appeal dismissed an appeal and cross appeal from P McMurdo J's judgment.  The applicant submits that the Court of Appeal did not challenge, set aside or otherwise interfere with P McMurdo J's "findings regarding the methodology" required by the SSA.  However, his Honour made no express finding beyond the acceptance of the residual value method of analysis as appropriate and that under cl 4.4 some assumptions must be made to calculate the value so as to apply the price formula under the SSA.
  1. It is appropriate to extract a longer passage from the award Pt 1 showing the arbitrator’s approach to these matters than the part emphasised by the applicant as follows:

“[100] …I do not accept the Respondent’s submission that improved market or market value is no more than a label for the result of the subtraction of items of estimated costs from estimated income with a profit factor of 25%. Unconstrained by other provisions of the SSA, an arbitrator would be free to adopt whichever method he or she thought most appropriate and reliable for the assessment of market value. In such a case, as the experts agree, that would not be done by adopting and confining oneself to a residual cash flow method. The proper construction of the SSA, in my opinion, is not that it defines market value. What it does do however is require that market value be determined on the basis of certain assumptions, whether they are comprehensive or accurately descriptive of the costs that valuers would always adopt or not. That does not mean that market considerations can or should be disregarded. The words used in a contract have work to do. That is so in the case of the words “market value”, “market valuation”, and “improved market value”. …

[101] It follows that the task for the valuer and the arbitrator is to determine the market value after making the assumptions that the SSA requires as to what items are costs, and income, and a profit of 25% which is in substance, to undertake a [variant of a] residual cash flow valuation. What I have said and what follows are, I think, consistent with the reasoning of PD McMurdo J at first instance in Mio Art Pty Ltd v Mango Boulevard Pty Ltd (No 2) and the Court of Appeal in Mango Boulevard Pty Ltd v Mio Art Pty Ltd, to which I am bound to, and do, defer. 

[102] The work that the words “market value”, “market valuation”, and “improved market value” have to do is to ensure that the quantum of each of the items of costs and selling prices of lots to be assumed, is calculated on a proper and commercial, that is to say “market”, basis. Incidentally, that this is what the SSA requires, is consistent with the obligations of the Respondent stated elsewhere in the agreements between the parties, to act commercially and in good faith in its dealings in relation to the Project, particularly in the circumstance that it has the right to do the design and construction works without tender and has effective control of the Project. Further, because a market result, a “market value”, must be determined (subject to an agreed profit of 25% and not some other “market” percentage profit), the costs and profit selected by the expert valuers must be capable of and produce a market value, that is, a market price upon which prudent parties would agree. 

[103] Real life market considerations, that is, commercial reality, has another role to play in the making of the market valuation under the SSA. If the adoption of the selected amounts in respect of an item or items of cost and the financial return on them produces an improbable and counter-intuitive commercial result on the known indisputable facts, for example that the Respondent actually paid $22,000,000 for the Property and incurred other substantial expenses in respect of it before the Effective Date, and that competent and prudent or rational developers would not buy such a Property unless they reasonably believed they could make a profit of 30% to 45% on all costs (inclusive of the actual purchase price of it), then there will be reason to question, and it would be in conformity with the contractual requirement of a market valuation, that there be at least a serious questioning and scrutiny of those inputs and income on them. In other words, a market valuation requires more than a simple acceptance of a computer generated number on the basis of one only highly contestable set of costs and income. 

[104] In substance then I accept that the residual cash flow method, or the variant of it for which the SSA provides, is the method of valuation which must be adopted here. But that method certainly does not preclude, indeed the requirement of a market valuation requires, a testing on the bases of various sensitivities, of the result for which the parties contend, and, if found improbable by reference to the market, a revisiting and testing of the inputs and outputs producing that improbability. That is not to ignore the ultimate requirement of a profit of 25% on the assumptions required to be made. It is simply to measure against the evidence, all relevant market considerations operating on the Effective Date, including expectations and requirements of profit then.” 

  1. Read in context, par [102] is part of a process of reasoning whereby the arbitrator accepted that the methodology required by the SSA is a variant of a normal residual value method of analysis – I interpolate that was what P McMurdo J meant by “constrained” – but did not accept that consideration prevented him from reaching values for inputs of hypothetical sales and costs under the methodology that would reflect market considerations.
  1. The applicant submits that the arbitrator departed from the contractually stipulated methodology in the award Pt 1.  It submits that the arbitrator had in mind parties who were unconstrained by the requirements of the SSA. 
  1. The weakness of the attack is that the applicant does not identify with precision how the arbitrator used the findings of which it complains in a way that contravened the methodology required by the SSA.  The arbitrator did not abandon the contractual assumptions under cl 4.4 in calculating the amount of the value as such.  Instead, he used his view of the proper construction of the SSA in deciding whether to accept or reject the amounts of hypothetical sales or expenses to be taken into account for the purpose of the inputs to be adopted in arriving at what, subject to the assumptions to be made as required by cl 4.4, was market value on the residual value method of analysis.
  1. By definition, a residual value method of analysis for a land development project begins with amounts to be adjusted to arrive at the residue as land value.  Logically, that requires the methodology to start with hypothetical sales.  Given the purpose of the analysis under the SSA, an illogical expression in cl 4.4 is that it requires a “profit on cost percentage return of 25 percent".  That suggests that the exercise begins with costs that are to be extended to a sales value by applying the profit margin of 25 per cent.
  1. However, that is not the way a residual value method of analysis calculation is performed to ascertain land value.  Instead, it starts with an estimate of sales that are to be reduced by the margin expected to account for profit and risk, so as to derive total costs from which further reductions are to be made to arrive at the residual amount, in this case the value of the land as at the effective date.
  1. Accordingly, the agreed profit on cost percentage return of 25 percent is adjusted under the residual value method of analysis under the SSA so as to be applied as a margin of 20 percent taken off sales to arrive at total costs.
  1. There is a potential logical difficulty in a “market value” residual value method of analysis to derive land value that is constrained by an agreed fixed profit margin.  When the starting point is an estimation of sales, the reduction of sales by a margin will result in a total amount of costs from which the residual value of the land can be calculated by determination of the other costs.  By definition, the land value as the residue is the unknown. If the inputs to the calculation otherwise are all to be estimated, the potential logical difficulty is that the relationship of the two sets of estimates will not conform to the agreed profit ratio of 25 percent on costs, unless the costs are low enough, in comparison to the estimate of sales, so that the residual value of the land is a positive value.
  1. According to some of the applicant’s witnesses’ evidence, the amounts of the hypothetical sales and other costs to be deducted from total costs would have produced a nil value for the residual land value.  The arbitrator was led to reject, in part, their evidence of hypothetical sales and other costs as evidence of market value.  His conclusion was reinforced by evidence as to the margin for profit and risk that a purchaser and vendor of the land would require and accept respectively for an en globo hypothetical sale as a residential development site of a parcel of land of the size in the present case for a true on market transaction.  The margin would have been 30 to 45 per cent on costs, not the agreed assumption of a profit of 25 per cent on costs. 
  1. In my view, none of that means that the arbitrator rejected or sought to ascertain value outside the agreed contractual methodology as construed by either P McMurdo J or the Court of Appeal.
  1. The applicant submits that the arbitrator failed to acknowledge that he was constrained by the SSA in his assessment of value and unilaterally raised and allowed himself to be diverted by considerations that were (only) relevant to an assessment of value that was unconstrained by the SSA.  In my view, that submission does not fairly take account of his reasoning as set out above, or that the arbitrator, having directed himself as to the proper construction of the SSA in those terms, faithfully followed that construction in his consideration of the evidence.
  1. In the end, the applicant’s so-called question of methodology is not really about methodology at all.  The arbitrator did not abandon the residual value method of analysis.   He did not abandon what had been said about it by P McMurdo J or the Court of Appeal as to the contractually required method.  He rejected that he was required to approach the questions of value under cls 4 and 8 of the SSA with both eyes closed as to the effect of the margin for profit and risk upon what would have happened in the market if someone were approaching the question of value on a residual value method of analysis.
  1. Of course, it is an everyday experience in modern commerce that investment decisions are made by developers and others based on a cash flow model of analysis.  That an investor making such a decision will have an investment “hurdle rate” of return upon the investment decision or will calculate an internal rate of return, in accordance with that well-known accounting concept, are no longer matters of mystery, if ever they were. 
  1. Any person with reasonable intelligence and a copy of Microsoft Excel or similar can quickly learn how to run a cash flow model in the form of a spreadsheet to produce an outcome of nominal value.  And, because of the program's discount function, it is almost as simple to produce a rudimentary model of discounted cash flows, although building and running such a model and doing so skilfully are two different things.  At the least, the program performs complex mathematical calculations lawyers and Judges once used to resort to tables to accomplish or have accountants and actuaries perform.
  1. If the question to be answered is a decision whether or not to invest (buy the land), running a cash flow model, whether in the form of a (simpler and less time sensitive) residual value method of analysis, or a more complex discounted cash flow method, will inform the answer to the question whether the investor’s “hurdle rate” is achieved.  Such an analysis or study is often called a feasibility study, because it is utilised to assess the feasibility of the proposed investment and development, to assist upon the decision whether to invest or to raise finance.[27]
  1. Although not put this way by the arbitrator, my own view substantially accords with his view, that it is inevitable that a commercially aware person approaching the question of value through a residual value method of analysis must assess the reliability of the inputs and outputs of such a model with an eye to the hurdle or target rate of profit and risk.  That the SSA requires a profit on cost percentage return of 25 percent to be deployed in ascertaining value for the contractual price formula does not necessarily prohibit the valuer or the arbitrator from any awareness of the likely parameters in arriving at the otherwise market driven components of the calculation.
  1. The effect of the arbitrator’s approach was that he accepted that when it came time to calculate value in accordance with the contractual price formula and methodology he was required to deploy 25 percent as the agreed rate for the “Profit on Cost percentage return”, using the contractual definitions, but up until that point he was not required to distort the inputs for the calculation of value if that would not have been the rate of profit on cost in an on market transaction.  The applicant’s real challenge is that in so doing the arbitrator did not give full effect to the agreed rate of return on costs as provided for in cl 4.4 of the SSA.  The applicant did not fully articulate what the arbitrator should have done instead, for the inputs for either sales or costs, in arriving at the valuation required under the SSA, in order to ascertain what was also to be a “market valuation” and an “improved market” value.
  1. However, in my view, it is not necessary to pursue these questions further, or to decide whether the arbitrator was right or wrong in giving to the contract what he saw was both a practical and a text driven construction.
  1. That is because, in my view, on no analysis does the applicant’s challenge rise to the level that it could be found that the arbitrator dealt with a dispute not contemplated or not falling within the terms of the submission to arbitration or that his award contains decisions on matters beyond the scope of the submission to arbitration. 
  1. Even if, as a question of law, on the proper construction of the SSA, the arbitrator was not free to consider whether the inputs for hypothetical sales and costs were to be amounts that would have been ascertained by a true market assessment, because the agreed profit on cost percentage return of 25 percent prohibited him from doing so, that would be an error of law in the proper construction of the contract comprised in the SSA, not something that was an excess of jurisdiction of the kind that engages the s 34(2)(a)(iii) of the CAA.
  1. The applicant relied on Legal & General Life of Australia v A Hudson Pty Ltd[28] and AGL Victoria Pty Ltd v SPI Networks (Gas) Pty Ltd (formerly Txu Networks (Gas) Pty Ltd) and anor.[29]  But both were cases concerned with whether a court could “review expert valuations and determinations”.  Another well-known case of the same kind, referred to in AGL, is Holt and anor v Cox,[30]  where Mason P said:

“A valuation may contain factual error or embody consideration of matters which should not have been taken into account, but it does not follow that the result is outside that which the contract contemplated would be within the realm of determination by the valuer.”[31]

  1. But the important point is that none of those cases concerned the law of arbitration and none was concerned with a statutory framework such as the CAA. As already mentioned, the CAA provides for an appeal to the court on a question of law[32] and that the court is not to intervene in an arbitration governed by the Act except as provided under the Act.[33]  The reasoning in cases dealing with the “review” of an expert determination at common law does not apply to an arbitral award made under the CAA.
  1. In my view, the first of the applicant’s grounds to set aside the award Pt 1 fails.

Procedural fairness and the CAA

  1. The applicant submits that the arbitrator’s introduction of his own methodological approach to value, as it was described, involved a fundamental departure from the requirements of procedural fairness.  Procedural fairness, as such, is not an express ground to set aside an arbitral award under s 34.  Not surprisingly, however, it is considered to be a factor that may engage the ground that a party was unable fairly to present their case or the ground that an award is in conflict with the public policy of the State.
  1. However, it is necessary to bear in mind that those statutory grounds under s 34 are not satisfied, per se, by a failure to accord procedural fairness or any breach of the rules of natural justice as applied in other fields of discourse of the law.  The context here is whether a statutory ground to set aside an arbitral award based on the Model Law is made out. In particular, s 18 of the CAA provides:

“The parties must be treated with equality and each party must be given a reasonable opportunity of presenting the party's case.

Note—

This section differs from the Model Law to the extent that it requires a party to be given a 'reasonable', instead of 'full', opportunity of presenting the party's case.”

  1. There are a number of cases that consider procedural fairness in some detail in this context.  In the present case, the applicant submits that the arbitrator decided value on a basis that was not pleaded or argued by the respondents.  Amasya was a case of that kind.  Again, I hope I may be forgiven for reproducing a lengthy passage from that case on this topic because, in my view, it accurately captures the law:

“…What is required is that the arbitral process be fair and that each party be given a reasonable opportunity to present its case. This position is consistent with what was said by the Hong Kong Court of Appeal in Grand Pacific Holdings Ltd v Pacific China Holdings Ltd (in liq) (No 1)—namely that the term ‘full opportunity’ in art 18 of the Model Law ‘cannot mean that a party is entitled to present any case it pleases, any time it pleases, no matter how long the presentation should take.’  This position is made express in s 18C of the International Act which provides that, for the purposes of art 18 of the Model Law, a party is ‘taken to have been given a full opportunity to present the party’s case if the party is given a reasonable opportunity to present the party’s case.’

The purpose of the requirement in art 18 of the Model Law is as stated by the Ontario Superior Court of Justice in Corporacion Transnacional de Inversiones SA de CV v STET International SpA:‘The purpose of art 18 is to protect a party from egregious and injudicious conduct by … [an arbitral tribunal]. It is not intended to protect a party from its own failures or strategic choices.’

If arbitral proceedings are conducted in a way that contravenes s 18 of the Act, the product of the arbitral process—the arbitral award—may be set aside or refused recognition or enforcement on the grounds that a party was unable to present its case. In Dongwoo Mann+Hummel Co Ltd v Mann+Hummel GmbH, Chan Seng Onn J, sitting in the High Court of Singapore, considered the ‘unable to present its case’ ground under art 34(2)(a)(ii) of the Model Law and said:

‘Whether a party was or was not able to present its case at the arbitration is very much a question of fact and degree, and it necessarily focuses on the overall conduct of the proceedings with particular attention paid to the conduct of the tribunal and the parties themselves.’

A breach of s 18 of the Act in the making of an arbitral award may also result in the award being set aside or recognition or enforcement being refused on public policy grounds. In TCL, the Full Federal Court conducted a comprehensive review of the ‘public policy’ ground under arts 34(2)(b)(ii) and 36(1)(b)(ii) of the Model Law.  Allsop CJ, Middleton and Foster JJ considered the restrictive interpretation to be given to this ground and made extensive reference to the legislative history of the Model Law and to international jurisprudence, including leading authorities from the Asia-Pacific region. For present purposes it is sufficient to recall the crux of this discussion, namely that ‘public policy’ is ‘limited to the fundamental principles of justice and morality of the state, recognising the international dimension of the context’.

In the course of its reasons, the Full Court considered the extension of the concept of ‘public policy’ to complaints about procedural fairness or natural justice such as those which arise in the present proceedings. Their Honours referred to the UNCITRAL report which led to the adoption of the Model Law by the United Nations General Assembly in June 1985, which states:

‘It was understood that the term ‘public policy’, which was used in the 1958 New York Convention and many other treaties, covered fundamental principles of law and justice in substantive as well as procedural respects. Thus, instances such as corruption, bribery or fraud and similar serious cases would constitute a ground for setting aside. It was noted, in that connection, that the wording ‘the award is in conflict with the public policy of this State’ was not to be interpreted as excluding instances or events relating to the manner in which an award was arrived at.’

The Full Court went on to consider the relationship between art 18 of the Model Law and the ‘public policy’ ground as that relationship was originally understood by UNCITRAL:

‘[I]t was clearly understood that breaches of art 18 could constitute a state of affairs contrary to … [public policy]. There was, however, reluctance to make explicit the fact that a breach of art 18 was a ground to set aside the award, not because of any expressed view that a breach of that central article should not lead to invalidity of the award (to the contrary it was thought that it could), but the perceived greater importance of aligning arts 34 and 36, than of aligning art 34 and a proposed art 18.’

That breaches of the rules of procedural fairness or natural justice—as those rules are understood in the context of art 18 of the Model Law—offend public policy has been made express by the Commonwealth Parliament in the International Act…

…Accordingly, the absence of corresponding provisions intended to avoid any such perceived doubt in the application of ss 34(2)(b)(ii) or 36(1)(b)(ii) of the Victorian Act does not mean that the concept of public policy is to be understood differently under the International Act and the Victorian Act. This position accords with what was said in TCL, namely that, in reality, there is no doubt that the requirement of ‘fairness and equality of treatment of the parties’ to arbitration is part of the concept of ‘public policy’. It follows from the preceding discussion that a breach of s 18 of the Act may result in an award being set aside or refused recognition or enforcement on either the ‘unable to present its case’ ground or the ‘public policy’ ground.”[34]

  1. In my view, to this extent,[35] the reasoning in Amasya and the cases to which Croft J refers should be followed in considering procedural fairness as a basis for setting aside an award under the CAA in the present case.
  1. The applicant structures its case of procedural unfairness by pressing three points.[36]  First, it submits that the essence of the arbitrator’s approach was to ascertain market value unconstrained by cl 4.4 of the SSA.  Second, it submits that the arbitrator’s findings as to (hypothetical) construction costs were also made in circumstances involving fundamental departures from the requirements of procedural fairness.  Third, it submits that the arbitrator’s findings as to the density and yield of the proposed development as going to the hypothetical sales were also made in circumstances involving fundamental departures from requirements of procedural fairness.

Market value and Mr Cox’s evidence

  1. These reasons have already dealt with the applicant’s contention that the arbitrator utilised a wrong approach in applying cls 4 and 8 of the SSA to ascertain the value of the land under the residual value method of analysis in a way that amounted to an excess of jurisdiction.  Looking at the same subject as a matter of procedural fairness, the applicant fastens, inter alia, on the arbitrator’s reasoning that:
  1. “… competent and prudent or rational developers would not buy such a Property unless they reasonably believed they could make a profit of 30% to 45% on all costs (inclusive of the actual purchase price of it)”[37] and
  1. “a prudent developer and purchaser would not have entered into a contract for the purchase of the Property at the time of the SSA and afterwards as I find, unless it could develop it and sell it for a profit on all of its costs (including, of course, the purchase price, holding charges, duties, opportunity costs and experts fees) of 30% or more.”[38]
  1. This reasoning  was utilised as part of the arbitrator’s assessment of the evidence of a number of the witnesses.  The assessment included that:
  1. “In my opinion, informed people in the market would not have done, and acted upon the, as I find, unconvincing calculations that Mr Ovenden, Mr Cox, and to some extent Mr Thomas, now make about density, yield, and demand. There is a further reason why I reject the results and the components of those results. It is that their numbers, quantities and prices would produce an implausible, a non-market result having regard to two realities: the prudent investor/developer would be looking for a profit of more than 30%, indeed up to 45%; and the Respondent’s case, based upon its experts’ calculations cannot produce a profit of anything remotely of that order on its actual minimum expenditure of $22,000,000 plus holding and other substantial costs incurred before the Effective Date”;[39]  and
  1. “A further reason why I do not accept a deal of Mr Cox’s evidence, and his conclusion on value, is his inattention to, and ultimate failure to question how it could be, adopting the yields, outputs and inputs that he did, and on the generally indisputable facts that the Respondent:   
  1. provided $22,000,000 for, and in respect of, the purchase of the land in August 2004;
  1. had holding (e.g. rates and land tax) and opportunity costs on it from then until the Effective Date;
  1. engaged and paid undisclosed but further substantial sums to professionals and consultants (lobbyists included) to prove up its potential, and to obtain development approval for the Property;
  1. was not proved or claimed to be either an imprudent or inexperienced purchaser/developer and contractor, indeed was as the Respondent’s Counsel properly accepted, a “rational” developer;
  1. as such would ordinarily look for a profit of more than (as I find) 30%;

that the Project would not yield a profit of anything like that percentage. (Mr Davis calculated the profit on the inputs and income of which he was instructed at only about 17%).”[40]

  1. The applicant submits that the use made by the arbitrator of an expectation of a profit on costs of 30 percent or more in rejecting Mr Cox’s evidence was procedurally unfair.  It submits that the question of profit on costs of more than 30 percent was raised only to the following extent:
  1. by Mr Robertson’s supplementary report dated 22 April 2015, p 4;
  1. by Mr Robertson’s evidence:

“Well, if the comparable sales are such that you — you come to X amount, and then you come to an amount that you think that the person who's looking for 25 per cent return will pay. And then, if you like, if you want to find the commercial rate you would then deduct a further amount — another percentage — that would reflect the — you know, what a normal person in commercial conditions, not taking into account the 25 per cent would pay”;[41]

“Normal developers look for between 40 and 50 per cent for a project of this size”;[42]

“...and then if you're looking for, say, a 10-year project like this one, you're looking at that 45 — 45 per cent — looking at somewhere in that area”;[43] and

“35 hectares is still a significant-size development, and they would be looking at 35 to 40.”[44]

  1. by Mr Cox’s evidence:

“I'm reluctant to make a pronouncement as to value or rates or discount unless I have thoroughly researched the market and my pronouncement — or my findings are market-based. Now, I haven't got the luxury of being able to tell you, and give evidence to you why my opinion to — to answer your question as such. I can only say I have never heard of 45 per cent before. It's a huge amount. I think it would be more than the 25 per cent because this was a major lengthy project with a lot of outlays having to be thrown at it. And all that reflects risk, and up goes that 20 profit factor. So it would be — I would — intuitively I say it's around 30, 35 per cent, but I wouldn't commit myself to that unless I had evidence of that”;[45]

  1. by Mr Davis’s evidence (although he was referring to an internal rate of return for a discounted cash flow not the profit on costs on a simpler model for a residual value method of analysis):

“It would depend on the developer's risk appetite and return requirements. It would depend on the project. But I think it's widely — for projects like this I think generally it's 20 to 30 per cent is the range. But it really is an individual choice that comes down to whoever is making the investment”;[46] and

  1. by the arbitrator’s comments made on 10 February 2016 (although not much is there).[47]
  1. In considering this challenge, it is important to keep firmly in mind that it is confined to the arbitrator’s deployment of an expected profit on costs of 30 percent or more.  For example, the arbitrator was also critical of the absence of sensitivity testing or analysis by the same or some of the same experts, but that is a wider subject and was one specifically raised by the arbitrator with the applicant’s counsel.
  1. The applicant’s narrower challenge based on the expected profit on costs of 30 percent or more is, first, that in circumstances where the respondents did not raise the point the arbitrator did not suggest to Mr Cox that his failure to take that into account undermined the opinions that he gave in evidence; and, second, the arbitrator did not raise the same point with the applicant’s counsel.
  1. In a court proceeding, it might have been expected that a point of such significance in rejecting an expert valuer’s opinion evidence as a witness would be raised with him or her in evidence and with the party relying on the expert’s evidence.  The comparison is not on all fours with the present case, but the rejection of evidence as fabricated or as not frank and complete usually requires that a witness be challenged by the judge if no challenge is made by the opposite party.[48]
  1. Against that, the findings of the arbitrator were not that Mr Cox fabricated or gave dishonest evidence – far from it – although the arbitrator expressed dissatisfaction with some of his answers. 
  1. Nevertheless, the sting of the arbitrator’s reasoning for present purposes was that Mr Cox should have taken something into account, but did not did so, and that reasoning was taken into account in a substantial way in rejecting his evidence.  This is a finding of a serious kind against a professional person who is instructed to prepare his report and to give evidence as an expert. The duties of an expert witness include that the expert has made all the enquiries they consider appropriate. An expert witness should be given an opportunity to answer a criticism that they have not done so. 
  1. This was not a court proceeding.  It was an arbitration governed by the CAA. It should not be forgotten that such an arbitrator may not be a legally qualified person.  Or that the arbitrator may have expertise in the matter at hand.  Or that such an arbitration may be conducted other than in accordance with the rules of evidence.[49]  As well, the proceedings are conducted in private[50] and participants are subject to statutory obligations of confidentiality.[51] 
  1. As it happens, however, this arbitration was conducted much like commercial litigation in a court.  The arbitrator was a legal practitioner with vast experience at the very highest levels, as both counsel and Judge.  The parties were represented throughout by senior and junior counsel and solicitors.   There were pleadings, witnesses who gave sworn evidence and written and oral submissions that followed the pattern of commercial litigation in a court or a court like hearing.
  1. Amasya was a case where the applicant’s grounds of complaint included that the arbitrator decided the dispute in a way that was a breach of procedural fairness or natural justice.  However, the specific complaint was that the award in favour of a builder was assessed upon a quantum meruit based on a finding that the building contract had been mutually abandoned, when that was a claim not pleaded.  Accordingly, the facts of that case do not greatly assist in this case.
  1. There are other cases that offer some insight as to the general approach to the present question in arbitral proceedings.  One is the 1981 decision in Fox v PG Wellfair Limited,[52] decided under the Arbitration Act 1950 (UK), where the arbitrator’s rejection of the expert evidence tendered by a claimant when the arbitrator did not raise the alternatives that he had in mind was analysed thus:

“The issues in the arbitration were not simply questions of general expert knowledge. They involved the separate disciplines of a structural engineer, a quantity surveyor, a chartered surveyor, and a valuer. The arbitrator’s expertise did not on the face of it cover all of those disciplines. I am, however, content to assume that he had sufficient expertise to enable him in effect to challenge the evidence of the experts, but his views should have been clearly put to them. In failing to take that course, in my view the arbitrator was guilty of technical or legal misconduct in failing to observe the principles of natural justice.”[53]

  1. Another example, referred to by the parties, is Interbulk Ltd v Aiden Shipping Co Ltd,[54] presumably decided under the Arbitration Act 1979 (UK), which concerned the scope of a party’s case as to the cause of a grounding of a ship when berthing.  The parties also relied on JVL Agro Industries Ltd v Agritrade International Pte Ltd.[55] However, it is not necessary to discuss that case to decide this case. 
  1. Closer to the present case is Trustees of Rotoaira Forest Trust v Attorney-General.[56]  It was decided under the Arbitration Act 1996 (NZ) that is based on the Model Law. It concerned a challenge to the valuation methodology adopted by arbitrators who had rejected the valuation models tendered by both sides of the dispute in favour of their own ideas.  The issue was not fairness to a witness but the scope of the parties’ cases as presented.  The applicant claimed that the arbitrators adopted their own model of valuation in breach of the rules of natural justice.  Fisher J framed the question as “whether there had been unacceptable surprise [that] must come down to a question of fact and degree to be determined in the individual case”[57] and later said:

“… an arbitrator is not bound to slavishly adopt the position advocated by one party or the other. It will usually be no cause for surprise that arbitrators make their own assessments of evidentiary weight and credibility, pick and choose between different aspects of an expert's evidence, reshuffle the way in which different concepts have been combined, make their own value judgments between the extremes presented, and exercise reasonable latitude in drawing their own conclusions from the material presented.”[58]

  1. Rotoaira was considered in both TCL[59] and Amasya.[60]  It is not necessary to set out the relevant discussion in these reasons, beyond observing that Fisher J’s analysis was described as helpful in TCL.
  1. In my view, it is a reasonable contention that the arbitrator should have asked Mr Cox to comment on why he had failed to consider whether his results were implausible against a general market expectation of a profit on costs of 30 percent or more for a project like the one under consideration and whether his failure to do so did not undermine the results at which he had arrived.  Further, in my view, it is at least arguable that the failure to do so was a breach of the rules of natural justice, if the respondents’ counsel failed to do so.
  1. Even so, these questions were but two of the many factors taken into account by the arbitrator in forming his views as to whether to accept Mr Cox’s evidence, primarily as to value of the hypothetical sales.  The line between what questions might have been asked and the questions that must be asked is more easily drawn with hindsight.  The advantage of review in hindsight is that any points other than the one to be considered may be allowed to fall away.  The busy context of a real trial or hearing environment is replaced by quiet concentrated reflection upon the single point. 
  1. The relevant considerations were summed up by Neazor J in Burne v Young:[61]

“The question comes down to whether the arbitrator, whose function is to hear and decide, has any obligation to say to a witness words to the effect `this is the conclusion I presently expect to draw from what you have said; do you want to say more about the point?' If there was such an obligation litigation of any kind would be likely to be prolonged, and the decision maker would at least appear to be drawn into the arena by ensuring that the limit of every witness' knowledge of the matter had been defined.”

  1. In the present circumstances, I am left unpersuaded that the posited error amounted to or caused real practical injustice to the applicant, and so it does not form the basis of effective review of the award on an application to set it aside under s 34.[62] 

Number of dwellings or density and Mr Ovenden’s evidence

  1. The applicant submits that the arbitrator’s findings as to the number of dwellings for the hypothetical development (or “density” as it was called) were made in breach of procedural fairness or natural justice.
  1. As previously summarised, the arbitrator found that the number of dwellings of the hypothetical development of the land was higher (2184 dwellings) than the assumptions utilised by Mr Thomas (1824 dwellings).  In fact, the primary witness of the applicant as to density was Mr Ovenden and the primary witness on that point for the respondents was Mr Simonic.
  1. Curiously, the applicant submits that the arbitrator’s findings as to the number of dwellings were beyond that contended for by the respondents in final submissions.  However that may be, Mr Simonic’s report contended for a substantially higher number of dwellings than that adopted by the arbitrator.
  1. In any event, a table comparing the results of the arbitrator’s findings with the number of dwellings sourced from the opinion of Mr Ovenden is set out below:
 

Total Areas (ha)

No. of dwellings identified in paragraph 288 of the Respondent’s closing submissions dated 23 June 2015

Dwellings determined by Arbitrator

% increase

Effective density

RD12/15

115.56 (plus a small area which I conclude will be developable)

1,734

1,910

10%

16.5

RD25

11.67

292

300

3%

25.7

RD40

2.35

94

100

6%

42.5

RD12-25

2.14

64

70

9%

32.7

Totals

131.72

2,184

2,380 (rounded)

9%

 
  1. The applicant submits that the percentage increases in the number of dwellings in each category were not foreshadowed during the hearing and that was a fundamental breach of procedural fairness because the applicant’s witnesses were not given an opportunity to understand, test and rebut “the case sought to be made by the arbitrator”.
  1. There is a misconception that begins this submission.  It is that the arbitrator sought to make a case about the number of dwellings.  Any reasonable reading of the arbitrator’s reasons in the separate sections of the award Pt 1 in paras [138] to [146] and par [147] to [182] demonstrates that the accusation is levelled without cause on this point.  It is to be noted that the applicant does not submit that the adjustments made by the arbitrator to its witnesses’ opinions were not open on the evidence.  That would not be a procedural fairness or natural justice ground of challenge to the award.  The complaint is that the witnesses upon the question of the number of lots or density should have had an opportunity to consider the arbitrator’s understanding.
  1. In par [179] and [180] the arbitrator found:

“The numbers in the third column are in my opinion too small. The [applicant] argues for an inflexibility of Council in relation to areas of park that is not likely to be the case. The numbers assume utter inviolability of every square metre of the conservation area, whether for the purposes of a park, or otherwise. Opportunities will be available to reduce, to a limited extent, the areas to be occupied by roads. The [applicant] and its consultants would have known before the Effective Date that the Council wanted a minimum of 15 allotments and that therefore smaller allotments than those that may have been generally available in the market would in all likelihood need to be produced. And, as I have found, there was, in effect, an increasing acceptance of, indeed appetite for more dense housing at the Effective Date.

The Council, an experienced planning authority, must also have been of the view that closer settlement generally in the area or areas having the attributes of the Property, and specifically a minimum thus of 15 per hectare was both appropriate and feasible. The Council wanted this Property to be developed accordingly. It would be unlikely to be insisting on a development that would result in a glut of small unsold allotments. The Council and ordinary financial prudence demanded that infrastructure, existing and future, be utilized and supplemented as best it could be. Market demand, as I have said, can be product driven. The [applicant] could not have been ignorant of these matters. It was before the Effective Date giving careful consideration to marketing and “branding” of the Project. The valuers assumed and made allowance for “marketing” of the Project. For these reasons, and the other reasons which I give elsewhere of concerns about Mr Ovenden’s and Mr Cox’s evidence, I think that they understate yield and demand for smaller sites. Taking account of all the evidence, especially the matters referred to in this and the preceding paragraph, I would therefore add to the Respondent’s propounded minimum total number of residential units of 1,734 in the RD12/15 neighbourhood about 10%, that is about 173 units and round the number off to 1,910.”

  1. In par [181], having made a number of general findings as to reasons why he was not prepared to accept the (too conservative) opinions of the applicant’s witnesses as to the number of dwellings, the arbitrator adopted the areas and yields that appear in the table above, increasing the number of dwellings from those proposed by the applicant as set out in the table above.  Apart from the 10 percent increase for RD12/15 dwellings, he described the increases as “slight”, which, in percentage terms they were.
  1. In my view, the arbitrator was not bound to disclose this process of reasoning to the applicant’s witnesses, as a matter of procedural fairness or natural justice.
  1. In the present circumstances, I am left unpersuaded that there was any error in this instance that caused real practical injustice to the applicant, and so it does not form a basis of effective review of the award on an application to set it aside under s 34.

Construction costs

  1. The applicant submits that the arbitrator’s findings as to the construction costs of the hypothetical development for the valuation were made in breach of procedural fairness or natural justice.  The thrust of the complaint is that the parties’ positions in submissions and evidence created a range for the relevant costs but the arbitrator reached a result that was lower than the lowest point of the parties’ range.
  1. It is unnecessary to set out the manner in which the evidence was presented in any detail.  There are two points to note at the outset.  First, the parties presented evidence as to the hypothetical subdivision and residential development of the land as at the valuation date.  Second, the parties presented evidence as to the construction costs for the hypothetical development.  The construction costs were broken into categories for consideration, including civil construction costs, infrastructure headworks charges, council fees and charges, consultants’ fees and landscaping costs. The total costs were also reduced to a per dwelling average, based on the number of dwellings that were proposed in the respective cases. On that footing, the parties submitted to the arbitrator a document setting out their final positions headed “Parties’ respective positions on inputs”.
  1. The applicant submits that the parties’ positions were that the all-inclusive construction cost per dwelling including infrastructure charges were:
  1. for the respondents, $87,915 (exclusive of GST); and
  1. for the applicant, $97,447.26 (exclusive of GST).
  1. The applicant submits that the effect of the arbitrator’s findings is that the all-inclusive construction cost, per dwelling, was $73,529.
  1. The applicant submits that the arbitrator was not permitted to decide that the construction costs were lower than $87, 915.  I reject that submission.  The applicant’s calculation of the costs on a per dwelling are just that – the applicant’s calculation.  There is no evidence that the parties agreed that the arbitrator was to decide the costs on a per dwelling basis as between the calculated high and low amounts.  It would have been illogical to do so. The total costs in each case were those for the different developments propounded by the respective parties.  A per dwelling average comparison does not compare like with like.
  1. The applicant presses a second complaint about the arbitrator’s calculation of construction costs.  This point begins from the arbitrator’s findings as to the extent of the likely hypothetical development.  At par [178] of the award, the arbitrator summarised the development propounded by the applicant, totalling 2184 dwellings based on RD15 land use, meaning a density of 15 dwellings per hectare.  He found that number was too small.  In par [181], taking into account a number of matters, the arbitrator found that the total was 2,380.
  1. In par [190] the arbitrator observed that the evidence of Mr Thomas was based on a total of 1,824 dwellings, based principally on RD12 not RD15 land use, and a cost of $179 million.  After examination of a number of factors in par [191] and consideration of the respondents' submissions in par [192], the arbitrator made findings in par [193] that there were reasons to reduce some of the costs but that as to infrastructure costs he had “not found it possible to quantify with any confidence actual amounts in this regard, but I do think it would be less than the too generous amount which I think Mr Thomas allowed for nett infrastructure costs.”
  1. In par [196] the arbitrator made further findings as to his view of the over allowance by Mr Thomas for contingencies, arguably in excess of $6 million (10 percent on $60 million), but he did not quantify the amount.  He continued in par [198] to reiterate and collect a number of the grounds of dissatisfaction that he had with Mr Thomas’s evidence, concluding that:

“In all of the circumstances I have decided that Mr Thomas’s total costing of about $179,000,000 should be reduced to $175,000,000 as the order of cost of the whole of the construction, after offsets. I do that on the basis that the over estimates for each of likely actual nett infrastructure charges and contingencies that Mr Thomas made would more than offset any further costs arising out of the higher yields than Mr Thomas was asked to assume.”

  1. There are two features of note about the finding in par [198].  First, although the arbitrator expresses himself as reducing Mr Thomas’s costs, he was not in fact reducing those costs as applied to the same development assumptions.  As previously mentioned, Mr Thomas ascertained his assessment of costs by reference to an assumed development of a total of 1,824 dwellings, based principally on RD12 not RD15, whereas the arbitrator’s development was 2,380 dwellings, based on RD15 land use.  However, the arbitrator was not confused as to Mr Thomas’s assumption of the extent of the development, except possibly for the discussion as to the 23 stages of 100 dwelling per stage in par [191]. Second, the arbitrator’s reduction of $179 million to $175 million cannot be analysed as a reduced total that has been arrived at from any particular addition or subtraction of components or some other mathematical process.
  1. The applicant submits that the costs found by the arbitrator were never put to any expert.  In my view, that is a misconceived complaint, for the reasons articulated by Fisher J in Rotoaira set out previously. 
  1. A second point advanced by the applicant is that the amount of the costs found by the arbitrator has no foundation in the evidence or from permissible inferences from that evidence. Reliance was placed on Tyler v Thomas,[63] a case concerned in part with whether a factual finding by a court that a valuation amount should be adjusted upwards by a percentage amount was an erroneous finding of fact. But this is a point about whether a fact as found was right or wrong on the evidence, not procedural unfairness or material justification.  The point does not come within the statutory grounds to set aside the award relied upon in support of the application.
  1. In my view, this ground of the application also fails.

Conclusion

  1. It follows that, in my view, the applicant has not sustained any of the grounds on which it applies to set aside the award under s 34 of the CAA.  The application should be dismissed.

Footnotes

[1]Proceeding BS1714/11.

[2] Mio Art P/L v Mango Boulevard P/L & Ors (No 2) [2012] QSC 348.

[3] Mango Boulevard P/L & Anor v Mio Art P/L & Ors [2013] QCA 271. 

[4] The grounds of the application to set aside the award Pt 1 as filed were wider, but they were not pressed.

[5]The section numbers of the CAA correspond to the Model Law article numbers.

[6] Commercial Arbitration Act 2010 (NSW); Commercial Arbitration Act 2011 (Tas); Commercial Arbitration (National Uniform Legislation) Act 2011 (NT); Commercial Arbitration Act 2011 (SA); Commercial Arbitration Act 2011 (Vic); Commercial Arbitration Act 2012 (WA); Commercial Arbitration Act 2013 (Qld); Commercial Arbitration Act 2017 (ACT).

[7] (1993) 177 CLR 485, 492.

[8][2016] VSC 326.

[9] [2016] VSC 326, [16]-[23].

[10] Compare the language of s 34A of the CAA, when an appeal is made against an award.

[11] [2015] SGCA 63.

[12] AKN & Anor v ALC & Ors [2015] SGCA 63, [10]-[11].

[13] AKN & Anor v ALC & Ors [2015] SGCA 63, [34].

[14] AKN & Anor v ALC & Ors [2015] SGCA 63, [39].

[15] AKN & Anor v ALC & Ors [2015] SGCA 63, [51].

[16] Interdict Act 1867 (Qld), s 21; Arbitration Act 1973 (Qld), s 30; Commercial Arbitration Act 1990 (Qld), s 43.  And on an appeal under s 38 of the Commercial Arbitration Act 1990 (Qld), see s 38(3)(b), which compares to s 34A(7)(c) of the Commercial Arbitration Act 2013 (Qld).

[17] Compare Alvaro v Temple [2009] WASC 205, [67]-[74]; re Scibilia and Lejo Holdings Pty Ltd Arbitration [1985] 1 Qd R 94, 99-102; Interbulk Ltd v Aiden Shipping Co Ltd [1985] 2 Lloyd’s Rep 410; Mustill and Boyd, Commercial Arbitration, 2 ed, p 565.

[18] Mustill and Boyd, Commercial Arbitration, 2 ed, p 567 and fn 12.

[19] For example, see Commercial Arbitration Act 1990 (Qld), s 21.

[20] [2001] 2 SLR (R) 273.

[21] AKN v ALC [2015] SGCA 63, [10]-[11]; BLC and others v BLB and another [2014] 4 SLR 79, [119].

[22] Sino Dragon Trading Ltd v Noble Resources International Pte Ltd [2015] FCA 1028, [86].

[23] Supreme Court of Queensland Act 1991 (Qld), s 29; Uniform Civil Procedure Rules 1999 (Qld), rr 766(1)(b) and 770, under which the power to remit to a particular Judge or excluding a particular Judge of the Trial Division is implied; compare Amalgamated Television Services Pty Ltd v Marsden (No 2) [2003] NSWCA 186, [38].  The principles that apply in exercising such a power were canvassed in Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 348, [6].

[24] Sino Dragon Trading Ltd v Noble Resources International Pte Ltd [2016] FCA 1131, [6].

[25] [2012] QSC 348.

[26] [2012] QSC 348, [69].

[27] I add that the expert evidence as to methodology and valuation technique before the arbitrator was tendered on the hearing of this application.

[28] [1985] 1 NSWLR 314.

[29] [2006] VSCA 173.

[30] (1997) 23 ACSR 590.

[31] (1997) 23 ACSR 590, 597.

[32] Commercial Arbitration Act 2013 (Qld), s 34A.

[33] Commercial Arbitration Act 2013 (Qld), s 5.

[34] Amasya Enterprises Pty Ltd v Asta Developments (Aust) Pty Ltd [2016] VSC 326, [28]-[35].

[35] I express no view on the later discussion in Amasya of the test to be applied.

[36] Again, the points pressed were fewer than those articulated in the affidavits supporting the application.

[37] Award Part 1, [103].

[38] Award Part 1, [234].

[39] Award Part 1, [180].

[40] Award Part 1, [229]

[41] Transcript, p 226.39-45.

[42] Transcript, p 227.30-31.

[43] Transcript, p 323.42-43.

[44] Transcript, p 324.5-6.

[45] Transcript, p 348.13-21.

[46] Transcript, p 921.38-42.

[47] Ex AJS1 to the affidavit of Andrew Shute filed 28 September 2016 in BS9991/16, document 130.

[48] State of New South Wales v Hunt (2014) 86 NSWLR 226, 232-234 [32]-[41]; Ashby v Slipper (2014) 219 FCR 322, 366-368 [141]-[150]; Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361, [67] and [75]; Bale v Mills (2011) 81 NSWLR 498, 515-516 [66]-[67].

[49] Commercial Arbitration Act 2013 (Qld), s 19.

[50] Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10.

[51] Commercial Arbitration Act 2013 (Qld), ss 27E-27I.

[52] [1981] 2 Lloyd's Rep 514.

[53] [1981] 2 Lloyd's Rep 514, 531.

[54][1984] 2 Lloyd’s Rep 66.

[55]  [2016] SGHL 126, [3]. [147]-[148], [159]-[162], [170], [174]-[175], [194]-[195] and [214].

[56] [1999] 2 NZLR 452.

[57] [1999] 2 NZLR 452, 462.

[58] [1999] 2 NZLR 452, 463.

[59] (2014) 232 FCR 361, 400 [141].

[60] [2016] VSC 326, [44]-[49].

[61] (High Court of New Zealand, Wellington, CP 68/89, 29 May 1991) at p 17-18.

[62] TCL Air Conditioner v Castel (2014) 232 FCR 361, 394 [112].

[63] [2006] FCAFC 6, [56].

Close

Editorial Notes

  • Published Case Name:

    Mango Boulevard P/L v Mio Art P/L & Ors

  • Shortened Case Name:

    Mango Boulevard Pty Ltd v Mio Art Pty Ltd

  • Reported Citation:

    [2018] 1 Qd R 245

  • MNC:

    [2017] QSC 87

  • Court:

    QSC

  • Judge(s):

    Jackson J

  • Date:

    18 May 2017

  • Selected for Reporting:

    Editor's Note

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2017] QSC 87 [2018] 1 Qd R 24518 May 2017Applications to set aside arbitral awards dismissed: Jackson J.
Appeal Determined (QCA)[2018] QCA 3920 Mar 2018Appeal dismissed: Fraser and Morrison and McMurdo JJA.

Appeal Status

Appeal Determined (QCA)

Cases Cited

Case NameFull CitationFrequency
AGL Victoria Pty Ltd v SPI Networks (Gas) Pty Ltd (formerly Txu Networks (Gas) Pty Ltd) and anor [2006] VSCA 173
2 citations
Jump To
Cite 1 - [2006] VSCA 173
Cite 2 - [2006] VSCA 173
AKN & Anor v ALC & Ors [2015] SGCA 63
7 citations
Jump To
Cite 1 - [2015] SGCA 63
Cite 2 - [2015] SGCA 63
Cite 3 - [2015] SGCA 63
Cite 4 - [2015] SGCA 63
Cite 5 - [2015] SGCA 63
Cite 6 - [2015] SGCA 63
Cite 7 - [2015] SGCA 63
Alvaro v Temple [2009] WASC 205
2 citations
Jump To
Cite 1 - [2009] WASC 205
Cite 2 - [2009] WASC 205
Amalgamated Television Services Pty Ltd v Marsden (No 2) [2003] NSWCA 186
2 citations
Jump To
Cite 1 - [2003] NSWCA 186
Cite 2 - [2003] NSWCA 186
Amasya Enterprises Pty Ltd v Asta Developments (Aust) Pty Ltd [2016] VSC 326
5 citations
Jump To
Cite 1 - [2016] VSC 326
Cite 2 - [2016] VSC 326
Cite 3 - [2016] VSC 326
Cite 4 - [2016] VSC 326
Cite 5 - [2016] VSC 326
Ashby v Slipper (2014) 219 FCR 322
2 citations
Jump To
Cite 1 - (2014) 219 FCR 322
Cite 2 - (2014) 219 FCR 322
Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485
2 citations
Jump To
Cite 1 - (1993) 177 CLR 485
Cite 2 - (1993) 177 CLR 485
Bale v Mills (2011) 81 NSWLR 498
2 citations
Jump To
Cite 1 - (2011) 81 NSWLR 498
Cite 2 - (2011) 81 NSWLR 498
BLC v BLB [2014] 4 SLR 79
1 citation
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Cite 1 - [2014] 4 SLR 79
Esso Australia Resources Ltd v Plowman [2016] SGHL 126
1 citation
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Cite 1 - [2016] SGHL 126
Esso Australia Resources v Plowman (1995) 183 CLR 10
2 citations
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Cite 1 - (1995) 183 CLR 10
Cite 2 - (1995) 183 CLR 10
Fox v PG Wellfair Ltd [1981] 2 Lloyd's Rep 514
3 citations
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Cite 1 - [1981] 2 Lloyd's Rep 514
Cite 2 - [1981] 2 Lloyd's Rep 514
Cite 3 - [1981] 2 Lloyd's Rep 514
Holt & Anor v Cox (1997) 23 ACSR 590
3 citations
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Cite 1 - (1997) 23 ACSR 590
Cite 2 - (1997) 23 ACSR 590
Cite 3 - (1997) 23 ACSR 590
Interbulk Ltd v Aiden Shipping Co Ltd [1984] 2 Lloyds Rep. 66
1 citation
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Cite 1 - [1984] 2 Lloyds Rep. 66
Interbulk Ltd v Aiden Shipping Co Ltd [1985] 2 Lloyd’s Rep 410
2 citations
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Cite 1 - [1985] 2 Lloyd’s Rep 410
Cite 2 - [1985] 2 Lloyd’s Rep 410
Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361
2 citations
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Cite 1 - (2011) 243 CLR 361
Cite 2 - (2011) 243 CLR 361
Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314
2 citations
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Cite 1 - (1985) 1 NSWLR 314
Cite 2 - (1985) 1 NSWLR 314
Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 348
2 citations
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Cite 1 - [2010] NSWCA 348
Cite 2 - [2010] NSWCA 348
Mango Boulevard Pty Ltd v Mio Art Pty Ltd [2013] QCA 271
2 citations
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Cite 1 - [2013] QCA 271
Cite 2 - [2013] QCA 271
Mio Art Pty Ltd v Mango Boulevard Pty Ltd (No 2) [2012] QSC 348
4 citations
Jump To
Cite 1 - [2012] QSC 348
Cite 2 - [2012] QSC 348
Cite 3 - [2012] QSC 348
Cite 4 - [2012] QSC 348
Re Scibilia and Lejo Holdings Pty Ltd Arbitration [1985] 1 Qd R 94
2 citations
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Cite 1 - [1985] 1 Qd R 94
Cite 2 - [1985] 1 Qd R 94
Sino Dragon Trading Ltd v Noble Resources International Pte Ltd [2015] FCA 1028
2 citations
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Cite 1 - [2015] FCA 1028
Cite 2 - [2015] FCA 1028
Sino Dragon Trading Ltd v Noble Resources International Pte Ltd [2016] FCA 1131
1 citation
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Cite 1 - [2016] FCA 1131
State of New South Wales v Hunt (2014) 86 NSWLR 226
2 citations
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Cite 1 - (2014) 86 NSWLR 226
Cite 2 - (2014) 86 NSWLR 226
Tang Boon Jek Jeffrey v Tan Poh Leng Stanley (2001) 2 SLRR 273
2 citations
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Cite 1 - (2001) 2 SLRR 273
Cite 2 - (2001) 2 SLRR 273
TCL Air Conditioner v Castel (2014) 232 FCR 361
3 citations
Jump To
Cite 1 - (2014) 232 FCR 361
Cite 2 - (2014) 232 FCR 361
Cite 3 - (2014) 232 FCR 361
Trustees of Rotoaira Forest Trust v Attorney-General [1999] 2 NZLR 452
4 citations
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Cite 1 - [1999] 2 NZLR 452
Cite 2 - [1999] 2 NZLR 452
Cite 3 - [1999] 2 NZLR 452
Cite 4 - [1999] 2 NZLR 452
Tyler v Thomas [2006] FCAFC 6
2 citations
Jump To
Cite 1 - [2006] FCAFC 6
Cite 2 - [2006] FCAFC 6

Cases Citing

Case NameFull CitationFrequency
Clarke Energy (Australia) Pty Ltd v Power Generation Corporation [2025] QSC 64 2 citations
Mango Boulevard Pty Ltd v Mio Art Pty Ltd [2018] QCA 394 citations
Rainbow Builders Pty Ltd v State of Queensland [2020] QSC 25 2 citations
1

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