Clarke Energy (Australia) Pty Ltd v Power Generation Corporation (Trading as Territory Generation) and Robert Holt KC

The applicant applied to set aside an arbitral award pursuant to s 34(2)(b)(ii) Commercial Arbitration Act 2013 on the basis that the award was in conflict with the public policy of the State of Queensland because the applicant was denied procedural fairness in the arbitration. The applicant complained that the denial of procedural fairness arose because the arbitrator failed to consider an issue in the arbitration. Kelly J rejected these arguments, holding that the arbitrator was only required to deal with the “essential issues” and that the issue the applicant complained of did not fall within this category. His Honour considered that even if the relevant issue was “essential”, the arbitrator nevertheless did deal with the issue. Accordingly, the application was dismissed.

Kelly J

31 March 2025

The applicant and first respondent were parties to arbitral proceedings. The arbitration concerned, inter alia, whether the first respondent was contractually obliged to determine whether certain events qualified to entitle the applicant to an extension of time and in making such determinations, to act fairly and reasonably (“the Extension Issue”). [1], [19]–[21].

The arbitrator delivered a partial award (“award”) where the applicant’s claims were dismissed and the first respondent’s counterclaims were successful. The applicant subsequently applied to set aside the award under s 34(2)(b)(ii) Commercial Arbitration Act 2013 (“the Act”) on the basis that the award was in conflict with the public policy of the State of Queensland because of a denial of natural justice to the applicant in the arbitration. [5]–[6]. In particular, the applicant contended that it was denied procedural fairness in the arbitration because the arbitrator did not consider the Extension Issue. [23].

Justice Kelly conducted a detailed review of the case law on what must be demonstrated to invoke this ground. [7]–[14]. In particular, his Honour concluded (and the applicant accepted) that the applicant was required to demonstrate that it had suffered “real unfairness or real practical injustice in how the [arbitration] was conducted or resolved by reference to established principles of natural justice or procedural unfairness” and that the ground in s 34(2)(b)(ii) of the Act is “not concerned with mere procedural imperfections but with a negation of rights which our legal system recognises as being fundamental …”: Mango Boulevard Pty Ltd v Mio Art Pty Ltd [2018] QCA 39, [104]; Colin Joss & Co Pty Ltd v Cube Furniture Pty Ltd [2015] NSWSC 735, [46]. [14].

His Honour also concluded (and the applicant recognised) that in seeking to demonstrate “real unfairness or practical injustice”, the applicant faced an “overriding requirement” to demonstrate that “a reasonable litigant in its shoes would not have foreseen the possibility of reasoning by the arbitrator of the type that [was] revealed in [the] award”. His Honour referred to Singaporean authority with approval which stands for the proposition that this “overriding requirement” encompasses the notion that an inference that the arbitrator failed to consider an important pleaded issue “must be shown to be clear and virtually inescapable”: AKN v ALC [2015] 3 SLR 488. [28]–[29]. His Honour also referred to the principle that an application of the present kind should never be used “as a basis to undertake a merits review of the arbitral tribunal’s substantive decision”: Lieschke v Lieschke (2023) 415 ALR 531, 537–538, [25]. [31].

Kelly J applied these principles in reaching the conclusion that the applicant failed to establish the ground in s 34(2)(b)(ii) of the Act. His Honour considered that the arbitrator was not required to deal with every argument on every point made in the arbitration and that the award was only required to deal with the “essential issues”, with the tribunal being accorded fair latitude to determine what is “essential”: TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd [2013] SGHC 186, [72]; Ascot Commodities NV v Olan International Ltd [2002] CLC 277; DBL v DBM [2024] SGCA 19, [36]. [32]–[34]. Also relevant to his Honour’s conclusion was the fact that the applicant did not plead the Extension Issue in the arbitration. In his Honour’s view, if the applicant wished to have the Extension Issue litigated, the applicant should have applied to amend its pleadings to bring the issue within the tribunal’s jurisdiction: CAJ v CAI [2021] SGCA 102, [40]. [103].

Having regard to the findings about the lack of pleadings about the Extension Issue and the conduct of the arbitration, his Honour concluded that the Extension Issue was not an “essential issue”. His Honour also found that the arbitrator nevertheless did consider and deal with the Extension Issue, and his Honour determined that it was not the role of the Court to second guess the merits of the construction of the contracts preferred by the arbitrator such that there was no failure by the arbitrator to consider an essential issue so as to amount to a denial of procedural fairness. [134], [139]. Additionally, his Honour observed that there is no obligation on an arbitrator to consider arguments that have been rendered academic by other reasoning in the award where the other reasoning resolves the relevant issue, and that natural justice did not require responses to every submission presented: TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd [2013] SGHC 186, [76]–[77]. [141]–[142].

Accordingly, his Honour held that the applicant had not established any breach of the hearing rule and ordered that the application be dismissed. [143], [146].

A Lukacs